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Hanover vape shops fear potentially crippling tax

Tony Myers sells e-cigarettes — also known as vapes — in his Hanover shop, About It All Vapors. The store's proceeds fund his special-needs employment program next door. All that could change in December if Myers is forced out of business.

“The only thing that is keeping my doors open is that I have until Dec.15 to pay it,"  Myers said of a new vape tax enacted on Oct. 1.

The new e-cigarette tax was enacted as a part of a tax package to balance the 2016-17 Pennsylvania budget. The package passed this summer with a strong bipartisan vote in both the House and Senate.

It includes a 40 percent tax on the wholesale price of e-cigarettes and a “floor tax” on existing inventory that must be reported and paid within 90 days. Expected revenue from the tax is  $13.3 million.

Rallying for an amendment

Hundreds from Pennsylvania gathered inside the Capitol Rotunda on Sept. 26 to rally against the tax. Consumers, businesses and legislators raised support for House Bill 2342, an amendment that would change the tax to 5 cents per milliliter of e-liquid.

If the amendment is not passed, the tax will affect at least 325 e-cigarette shops in Pennsylvania, 60 of which have already closed their doors in anticipation of the tax taking effect, according to American Vaping Association President Gregory Conley.

“You can’t collect a 40 percent tax on businesses that do not exist.” said 83rd District Representative Jeff Wheeland, who proposed the current amendment.

It is the first time a tax this high has been demanded on existing inventory of an industry, according to Chuck Huff, online vape shop owner and administrator of the Vapers Against Unfair Taxation Facebook group.

“It’s not survivable for someone as small as me, " Myers said.

For larger businesses like LifeSmoke Vapors, the 40 percent tax is "survivable," said owner Mike Curry. LifeSmoke has five locations, including one in Hanover. To accommodate the tax, Curry has had to put purchasing on hold to limit his inventory, scale back on advertising and new hires and look for manufacturers that will offer better pricing.

"What drives business is bringing in new products and options for customers," he said. The business will take a big hit with the 40 percent tax, but with the amendment, it could still be profitable.

Changing the tax to 5 cents per milliliter is a step in the right direction, according to Alex Clark, legislative coordinator for The Consumer Advocates for Smoke-Free Alternatives Association.

"It will allow shops to remain open," he said. "It’s tax on point of sale.”

Huff said that if shops remain open, revenue potential is even greater than that projected by the budget.

"What we saw represented is 40 percent of the industry," he said. "We’ve sent out surveys to shops to see how many milliliters they sell a year. It comes out to about $11.5 million of revenue brought in. With 100 percent of the industry, it will be $15 million."

Many traveled to Harrisburg from throughout Pennsylvania to show their support.

“I honestly did not expect that many people to turn out," said Eric Winkelvoss, from West Mifflin. He and his friends, Casey Anastas and Patrick Grimm, carpooled three hours to attend the rally.

Most business owners and consumers who attended the rally were previous smokers, citing vaping as the reason they quit. They feel it's also important to keep the shops open to continue helping others.

“I measured my success by the smokers that I helped get off tobacco," said rally emcee John Dietz.

Are e-cigarettes harmful?

E-cigarettes are categorized by the FDA as tobacco products, and, according to the American Heart Association and the American Lung Association, they have the potential for harm.

Clark acknowledges risks to using e-cigarettes, but concludes they are more helpful than trying to quit cigarettes by other methods.

“A lot of the misinformation (against e-cigarettes) is based on this deeply ingrained ideology of groups that support a prohibition agenda and do not acknowledge harmful reduction,” Clark said. “They would rather see people attempt to quit and fail.”

Research released this April from the Royal College of Physicians hailed e-cigarettes as 95 percent safer than traditional cigarettes.

Stanton Glantz, director of the Center for Tobacco Control Research and Education, denies the 95 percent claim. E-cigarettes, he said, are less dangerous than cigarettes because of the lack of combustion and lower levels of carcinogens, but nowhere near as low as 95 percent because of their potential to cause cardiovascular and pulmonary problems.

Prolonged exposure — 90 days — to low doses of acrolein, a chemical in e-liquids, can result in trauma to the heart, which can cause tissue damage, according to a study from the American Heart Association Tobacco Regulation and Addiction Center.

“I’m shocked that the Royal College of Physicians put their name on it," he said of their research touting e-cigarette's benefits. The report released in April has no evidence, he said, and its authors had financial connections to the e-cigarette and tobacco industry.

Huff argues that research from Dr. Konstantinos Farsalinos, a research fellow at the Onassis Cardiac Surgery Center in Athens, Greece, who has been researching e-cigarettes since 2011, has disproved claims made by organizations such as the American Heart Association. E-cigarette companies have funded some of the research, though Farsalinos has not received any compensation.

"Our biggest uphill battle is misinformation," Huff said.

“I think this 40 percent tax is a disaster for public health," said 169th district representative Kate Klunk. "There’s still no evidence of any non-smoker becoming addicted to nicotine from vaping."

She said not having the tax will save money the state would have spent on treating sick smokers.

“Pennsylvania has the highest Medicaid population of smokers," she said.

Do e-cigarettes help users quit smoking?

"The FDA's Center for Drug Evaluation and Research has not approved any e-cigarette as a safe or effective method to help smokers quit," according to the American Lung Association.

In August, the FDA announced it would submit e-cigarettes to a process of approval to determine which products can remain on the market.

The American Heart Association asserts that e-cigarettes "target young people, can keep people hooked on nicotine and threaten to re-normalize’ tobacco use," but the Royal College of Physicians report counters that nicotine use is uncommon for people who have never smoked before.

Nicotine levels can also be controlled within e-cigarettes--some containing no nicotine at all, according to online shop EverSmoke, although the FDA notes that almost all e-cigarettes contain nicotine, with traceable amounts in nicotine-free products, determined in lab tests in 2009.

According to Glantz, non-smokers turning to e-cigarettes is rare for adults over 25, but youth who initiate e-cigarettes are three times more likely to be smoking cigarettes a year later.

"A study by the Centers for Disease Control and Prevention found that 76 percent of current adolescent users of e-cigarettes also smoke conventional cigarettes." according to the American Heart Association.

“The big effect on kids is expanding the nicotine market and leading cigarette smoking. The big effect on adults is inhibiting quitting," Glantz said.

What's next?

The bill proposing the 5 cents per milliliter tax was presented to the financial committee on Sept. 27. It passed.

"That tells me they heard us and are aware of the issues," Curry said.

The next step will be presenting the bill before the House and the Senate. It is slated to reach the House on Oct. 18.

Jake Wheatley Jr., the Democratic chair of the finance committee, was one of four who voted against the bill in the committee.

“From a budgetary perspective, we are rushing to do something, and we don’t know the impact it would have on the budget,” he said.

Based on the current selling rate for vape products, he said, the projected revenue would be $4.5 million, which does not meet the budget's projected revenue based on the 40 percent tax.

If the bill passes, it will be a small victory for the vaping community, but there is still more work to be done.

If e-cigarettes are to be categorized with other tobacco products, Huff argues, all tobacco products should be subject to a tax. Under the 14th Amendment, he said, states cannot tax similar products differently, and currently, there are no taxes imposed on cigars in Pennsylvania.

The legislature only has a few months before it breaks before the presidential election, Klunk said.

Source: http://www.eveningsun.com/story/news/2016/10/04/hanover-vape-shops-fear-potentiially-crippling-tax/91175676/

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