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Vape Tax Brings in Millions, but 100-Plus Businesses Close

Next month, it will have been one year since the tax went into effect. In that time, it has brought in $13.7 million, according to the Department of Revenue — and more than 100 of the state's estimated 400 vape shops have closed, says the Vapor Technology Association. Customers are paying more. Advocates still hope for repeal or reform. Businesses that remain open are hurting.

The tax requires retailers to pay 40 percent on inventories when purchasing from wholesalers. An individual with a $100,000 inventory would have to come up with an extra $40,000 to stay in business.

Advocates of vaping say it helps people stop smoking and argue their cause is a public health issue. Some studies have found that e-cigarette vapor has lower levels of toxic elements than tobacco smoke, although the Food and Drug Administration previously had said more research was needed. The FDA announced in July that it would begin an effort to encourage development of "innovative tobacco products that may be less dangerous than cigarettes," interpreted by those in the industry as a loosening stance toward e-cigarettes.

In Pennsylvania, the tax has represented another source of desperately needed revenue. To vape-shop owners, it has meant something else over the last 10 months.

Among the stores that have closed, Phillyvapes shuttered its Northeast Philadelphia location during the summer; its South Philadelphia shop is converting into a members-only lounge, said manager Rome Savann.

People "can come in and hang and vape," Savann said, and membership costs will cover rent. It will continue selling products online.

Others are pushing forward, like VaporFi on South Street, which has survived in part because it is a franchise of a Miami-based company that makes its own products. That has helped insulate the shop from the tax's impact, but the business could be doing better, said manager Alex Byers.

 

Vapers are holding on to hope for action in Harrisburg.

While advocates have hoped the tax would be repealed or replaced during this year's budget negotiations — and say they have been lobbying lawmakers — there has been little movement on bills proposed in both chambers to swap it for a 5-cents-per-milliliter tax, which business owners say would be less harmful.

"There's really no conversation taking place. The silence is killing us," said Amelia Rivera, who runs the Pennsylvania Vape Association and a vape shop in Hamburg, Berks County, with her husband. They said the tax has cut their income by more than half and they've discussed looking for second jobs.

Vapers believe they have support among lawmakers but feel they are up against big tobacco and a lack of knowledge about the emerging industry, said Alex Clark, executive director of the Consumer Advocates for Smoke-Free Alternatives Association.

A per-milliliter tax on the customer at the register would take the burden off the retailer as long as it is 7.5 cents or less, the advocacy groups say. (Anything higher would be worse for them than the 40 percent tax. The Pennsylvania Vape Association estimates half of the remaining 300 stores in Pennsylvania would close within a year.)

Many of the owners and workers at shuttered stores remain politically and socially active in vaping. Even if the legislature does nothing about e-cigarettes this session, activists say they will continue to lobby for change, citing the belief that their products change people's lives and improve health.

 Source: US News
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