The price of vaping: Ohio Senate trying to add 17% tax to vapor products

Ohio

Vapor industry experts say the proposed 17% tax would cripple many businesses

COLUMBUS, Ohio (WKBN) – There is a big push going on at the highest levels of state government to increase smoking cessation.  

Governor Mike DeWine has proposed increasing the age to purchase tobacco products from 18 to 21 in his state budget proposal, for instance. 

The Senate decided to add a tax on vapor products to accentuate the effort. 

Currently, tobacco products like cigarettes are subject to the OTP, which carries a 17% tax at the wholesale level. 

A few years ago, the vapor industry was going to be looped in with this, but convinced lawmakers it was still a burgeoning industry that needed time to get its feet in place, so it was spared. 

Now, armed with reports that more teens are vaping than ever before, lawmakers appear to be ready to levy that tax. 

Senate President Larry Obhof says it could have been worse than 17%.  

“Some members had raised the issue of potentially taxing them at the same rate as cigarettes, that there is a cigarette equivalency,” Obhof said. 

Some estimate such a rate based on nicotine equivalency would increase the 17% ten-fold.  

Republicans say the thing tobacco and vapor products have in common, often, is nicotine. 

James Jarvis is the president of the Ohio Vapor Trade Association and an owner of Vapor Station. He has several stores in and around Columbus. 

He claims you cannot compare cigarettes to vapor products and determine a nicotine equivalency.  

“They don’t work the same, they don’t use the same, you can’t equate an amount of puffs to the amount of puffs in a cigarette,” Jarvis said. 

Others will disagree with him though, saying the amount of nicotine in e-liquids is clearly marked, and the finite amount of nicotine in a cigarette can be estimated — a comparison could be made. 

What muddies the waters is that the highly addictive drug can be found in varying amounts of vapor products. Some have no nicotine in them at all so an equivalency-based tax would have to take that into account. 

Vapor industry experts say the proposed 17% tax would cripple many businesses that cannot afford to absorb the cost. 

Further, Jarvis doesn’t believe the lawmakers understand the industry to begin with. 

He estimates adding the tax would force him to raise the prices on the goods he sells by 30-40%. 

He says if that happens, one of two things will happen: customers will buy what they want online from sources the legislature can’t regulate (which is already a battle he is waging even without the tax) or they are just going to look for a cheaper solution to getting their nicotine fix. 

Where else can they get nicotine? From tobacco products. 

Which can be problematic for the plan lawmakers have of trying to reduce the use of tobacco products in the first place. 

But what if the goal is to eliminate what they consider a gateway to cigarettes? 

One way to remove a problem is to make it an economic loser. So, if you see vapor products as the way teenagers are becoming addicted to nicotine before smoking a cigarette, why not try to eliminate that pathway? 

“If you are a 16-year-old who’s not smoking cigarettes and you have flavored vapor and become addicted to nicotine when you otherwise weren’t using nicotine products, that’s a different story,” Obhof said right after admitting that vapor products could be a healthier choice than cigarettes for adults who had already been smoking. 

So, while the Senate president can see the virtues of trying to stop smoking by using vapor products to, step by step, work their nicotine dependency down to zero, the fact that teens are doing it for different reasons has become the impetus for a massive cost increase to those who will struggle to justify a higher cost for vapor products in the first place. 

Jarvis says that ultimately, 17% of zero is zero, in regard to taxing the invoices of wholesale orders from distributors. In other words, if he goes out of businesses, the tax does nothing and his customers go find their nicotine somewhere else. 

Still, Jarvis knows the industry cannot continue to get a free pass.  

“We’re not opposed to a tax, we’re opposed to an unreasonable tax,” Jarvis said. “We want to be a part of the solution, we want to help this whole situation.” 

What does that look like to Jarvis?

Without many specifics, he mentioned an additional tax paid at the register. 

That hits the end user only, the target the cessation is intended for in the first place, and allows the small businesses to keep costs manageable. 

But that still supposes the intent is on cessation and not the elimination of an industry that teens have found a way to abuse. 

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