Critics: House e-cigarette tax would crush MN business

For Minnesota’s growing e-cigarette industry, the House omnibus tax bill looks like a bust.

Buried in the bill is a provision that would change the way e-cigarettes are taxed. Right now, disposable e-cigarettes or vapor used in reusable e-cigarettes is taxed at 95 percent of the wholesale price of tobacco products.

The tax bill would change the rules to impose a 30 cent tax on every milliliter of vaping solution.

Vaping retailers and manufacturers say that amounts to an 800 percent tax increase.

“This will crush the vaping industry in Minnesota,” said Tim Koester President of the Independent Vapor Retailers of Minnesota. “I suspect a majority of Minnesota vape businesses will not be able to operate much longer if this new tax is imposed.”

Some retailers may see a tax cut if they’ve been selling small amounts of vaping liquid and if the current wholesale prices of tobacco is low.

In fact, the tax change amounts to a more than $9 million cut in state revenue because the Department of Revenue estimates that 65 percent of e-cigarettes sold now are the disposable variety – meaning they contain less vaping liquid.

Meanwhile, the House tax bill is a boon for the cigarette industry.

It stops automatic annual increases in the cigarette tax adopted by the Legislature in 2013, which the Department of Revenue estimates will cost the state $39 million by the time the provision is fully implemented.

And it effectively reduces the price of cigarette stamps cigarette distributors buy from the Department of Revenue and are required to affix to their products. The change will amount to a $4 million hit to the state’s general fund for the biennium.

  • Janet Wambold-Buraik

    Essentiallly they are trying to keep people smoking, which we know kills people, rather than switching to vaping which has not been proven to do any harm at all. How does this make any sense at all? Meanwhile, the FDA approves powdered alcohol that looks like kool-aid.

  • Gregory Conley

    That fiscal note is dead wrong and the Department of Revenue should revise it.

    According to data compiled by Management Science Assosications, Nielsen Convenience, TTB, and USDA, 82.8% of sales of vapor sales in Minnesota are e-liquid. When you add in untracked channels (i.e., vape shops), that likely means that NINETY percent-plus of vapor sales in Minnesota are e-liquid.

    This is based off data for the 12 weeks leading up to February 21, 2015

  • Troop Wol

    Why does Minnesota want to crush small business while helping big tobacco? This tax would bring on black market sales for many vapers that refuse to go back to smoking. And all this extra tax when we have a surplus. For shame MN!

  • Pomegranny

    This is not the business we need to be crushing. That would be our nemesis, Big Tobacco, whose burned tobacco cigarettes are proven killers. It’s kinda funny Tobacco Control is on Big Tobacco’s side in this fight….if so many smokers and their families weren’t at risk.
    Just leave us to sell our e liquid and we’ll get rid of smoking for you. Normalize Harm Reduction!