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E-cigarette tax would destroy Ohio small businesses

By   /   May 15, 2015  /   News  /   No Comments

Photo credit: Evolved Vapors

AT RISK: A fast-growing small business, Evolved Vapors will cease to exist if e-cigarettes are subjected to tobacco taxes

By Jason Hart | Ohio Watchdog

Gov. John Kasich’s steep e-cigarette tax, should lawmakers pass it, will have deep repercussions.

For one, central Ohio small-business owner Alec Cardellino will probably be out of work .

“It would destroy our business,” Cardellino told Ohio Watchdog in a phone interview. “We basically would have to close our doors the day it was enacted.”

Photo credit: Ohio House

AN ALTERNATIVE: Alec Cardellino opened Evolved Vapors to sell alternatives to tobacco

E-cigarettes helped Cardellino and a friend quit smoking. In turn, they opened Evolved Vapors in 2013 to sell nicotine vapor products as alternatives to tobacco. They have five full-time employees in three stores.

E-cigarettes contain no tobacco, emit far fewer harmful chemicals than tobacco smoke and contain a “negligible” amount of carcinogens, based on a review of 81 studies Cleveland Clinic highlighted last summer.

But Ohio’s Republican governor, who is fighting for a $1-per pack cigarette tax hike, wants to tax vapor products at the same rate as cigarettes — more than doubling their cost.

Under Kasich’s proposal, a 30-milliliter container of “e-liquid” sold for under $20 at Evolved Vapors would be hit with a $33.75 tax at the wholesale level.

“Apply sales tax to the total, and a product that was $20 walking out of my store would go upwards of $60,” Cardellino said. And that’s in addition to other tax hikes included in the original version of House Bill 64, Kasich’s 2016-17 budget.

BACKGROUND: Proposed tax hikes torch Ohio Gov. Kasich’s reform narrative

Between proposals to increase the Commercial Activity Tax, levy new taxes on inventory and apply the sales tax to many business services, “House Bill 64 plans to destroy small business, vapor or not,” Cardellino said.

Evolved Vapors wouldn’t be the only “vape shop” to go under if legislators backed Kasich’s decision to tax tobacco-free vapor products as if they contained tobacco.

“We’re already a billion-dollar industry and the shops are, for the most part, family owned and operated small-business, grassroots from the heart,” Cardellino said. “We would mostly go out of business. The ones that are capable would move out of the state and ship back in.”

Cardellino says many of the products his stores carry are manufactured in Columbus — which would certainly change if the state imposes a massive tax on wholesalers.

In testimony before the Ohio House this spring, Cardellino asked lawmakers to “give us an opportunity to show you how much sales tax alone we can generate for the state.”

“If this is all a means to create a surplus so we can pay for an income tax reduction, this is not the way to do it,” he told Ohio Watchdog. “We will see a net loss in the millions.”

While the substitute version of House Bill 64 approved by the House excluded the vapor product tax and a number of Kasich’s other proposed tax hikes, Cardellino and his peers aren’t yet out of the woods.

The Kasich administration is pressing Ohio Senate members to restore the nicotine vapor tax to the budget, with support from public health advocacy groups who say vapor products should be taxed the same as cigarettes.

release from the governor’s office endorsed by Campaign for Tobacco-Free Kids, the American Cancer Society’s Cancer Action Network and others framed Kasich’s tobacco and e-cigarette tax plan as a way to both curb smoking and bring steady revenue to the state.

“ACS CAN fully supports the Governor’s proposal to increase the tax on a pack of cigarettes by $1.00/pack and increase the tax on other tobacco products,” spokeswoman Michelle Zimmerman said in an email to Ohio Watchdog.

“ACS CAN supports laws that treat e-cigarettes like all other tobacco products. Also, state tobacco control programs should also include e-cigarettes in their surveillance and evaluation tools, as appropriate,” Zimmerman added.

“We strongly support Governor Kasich’s proposal to increase the cigarette tax by $1 and equalize tax rates on other tobacco products to prevent kids from smoking or using any tobacco product,” Beverly May of Campaign for Tobacco-Free Kids told Ohio Watchdog via email.

May continued, “We think e-cigarettes should be taxed at the same rate as cigarettes and other tobacco products until the FDA determines that the science is adequate to conclude that they in fact help smokers quit.”

RELATED: Critics argue against increased cigarette taxes

Vapor tax or none, the Ohio House and Ohio Senate must agree on a budget to send to Kasich’s desk by the end of June.

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Jason was formerly a reporter for Watchdog.org