N.C. Passes Electronic Cigarette Tax

Reynolds supported the five cents per milliliter of e-liquid tax

Published in Tobacco E-News

By  Melissa Vonder Haar, Tobacco Editor

Rep. Ruth Samuelson

RALEIGH, N.C. --By next year, Minnesota will no longer be the only state to tax electronic cigarettes. Last week, North Carolina Governor Pat McCrory signed into law a bill that, among other things, will levy a modest tax on e-cigarettes and vapor products starting in 2015.

The tax on five cents per milliliter of e-liquid tax received bipartisan approval in both the state Senate and House, Reuters reported.

While the Senate made no efforts to strip the bill of the electronic cigarette tax, some questioned the methodology behind the tax: state Senator Ben Clark (D) proposed an amendment that would tax vaping products based on the amount of nicotine rather than the amount of liquid.

"We're trying to draw a relationship between the nicotine content, the e-liquid and the excise tax imposed therein," Clark said.

Most of the Senate disagreed, with Clark's amendment failing by a 37 to 12 vote.

The five-cent excise tax is significantly lower than Minnesota's (where e-cigarettes are taxed at a rate of 95% of the wholesale cost), garnering support from the Winston-Salem, N.C.-based Reynolds American Inc., whose Vuse electronic cigarettes use only a 0.5-milliliter cartridge.

Reynolds spokesperson David Howard voiced the company's support to the House finance committee last week, saying the measure would help establish "a fair and reasonable" e-cigarette excise tax.

State Representative. Julia Howard (R) told The Winston-Salem Journal this was "a rare example of an industry wanting to be taxed."

Proponents of the bill agreed with Reynolds on the need to tax electronic cigarettes differently than combustible products.

"Tobacco and vapor products have vastly differing health impacts, manufacturing processes and business models," state Rep. Ruth Samuelson (R), a sponsor of the bill, told Reuters. "In light of this, we must ... draw a clear distinction between how North Carolina treats tobacco products and vapor products."

Opponents argued that, because of the potential health benefits of e-cigarettes, the state should not dissuading trials with taxes.

"It makes little sense in this fragile economy to impose higher taxes on a product that provides consumers a viable and harmless alternative to traditional tobacco products," wrote Grover Norquist, president of Americans for Tax Reform, in a letter to state legislators (read the full letter here).