North Carolina lawmakers adopt tax on electronic cigarettes

RALEIGH N.C. Thu May 29, 2014 6:06pm EDT

A detail view of the retail packaging for the new VUSE digital vapor cigarette is seen during a news conference at Reynolds American in Tobaccoville, North Carolina May 23, 2014.  REUTERS/Chris Keane

A detail view of the retail packaging for the new VUSE digital vapor cigarette is seen during a news conference at Reynolds American in Tobaccoville, North Carolina May 23, 2014.

Credit: Reuters/Chris Keane

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RALEIGH N.C. (Reuters) - North Carolina, the top U.S. tobacco-producing state, will levy a modest tax on increasingly popular electronic cigarettes as part of legislation adopted by state lawmakers and signed by the governor on Thursday.

Republican Governor Pat McCrory signed a measure that adds a tax of 5 cents to each milliliter of the nicotine liquid that e-cigarettes use. Smokers inhale through a battery-powered metal tube, turning the liquid to vapor.

The tax was cleared by the state Senate and House in bipartisan votes earlier on Thursday.

Sales of e-cigarettes have grown dramatically and are expected to surpass traditional cigarette sales within a decade, yet they remain largely unregulated. Several states have considered taxing them at a rate much higher than 5 cents, on a level that is similar to traditional cigarettes. So far, only Minnesota has adopted such a tax.

North Carolina taxes traditional cigarettes at 45 cents per pack.

Large tobacco companies including Reynolds American Inc, which is based in Winston-Salem, North Carolina, supported the 5-cent tax as they seek to replace the declining market for traditional cigarettes.

The measure's supporters highlighted what they claimed are the health benefits of e-cigarettes.

“Tobacco and vapor products have vastly differing health impacts, manufacturing processes and business models,” Representative Ruth Samuelson, a sponsor of the bill, said in an email on Thursday. “In light of this, we must ... draw a clear distinction between how North Carolina treats tobacco products and vapor products.”

Opposition to the tax has come from both Democrats and Republicans.

Some Democrats argued that e-cigarettes should be taxed at a higher rate, or that the state should wait to decide how to tax them until the U.S. Food and Drug Administration unveils regulations on e-cigarettes that are expected this summer.

Others said there should be no tax at all on a product that has been touted as a less harmful alternative to regular cigarettes.

“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,” Grover Norquist, president of Americans for Tax Reform, wrote in a letter to state legislators.

(Editing by Colleen Jenkins and Matthew Lewis)

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Comments (5)
Freedom1958 wrote:
Considering that e-liquid consists of only 4 ingredients: PG, VG, flavoring agent (common food flavorings will do nicely) and nicotine, I predict that a LOT of North Carolinans will soon be manufacturing their own e-liquid.
The genie is out of the bottle, folks! Taxing it or regulating it will only move production underground.

May 29, 2014 8:22pm EDT  --  Report as abuse
morbas wrote:
Separation of Corporate and State is needed to shield against oligarch subversion of the peoples Democracy. On issue is, that consumers pay business burdens through product cost overhead. Sales tax does not index with income level, likely a regressive tax visa vice income level. Once again, the wealth disparity is aggravated through political processes favored by established corporate power(s).
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“Large tobacco companies including Reynolds American Inc, which is based in Winston-Salem, North Carolina, supported the 5-cent tax as they seek to replace the declining market for traditional cigarettes.“
“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,”
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morbas(i)

May 30, 2014 8:45am EDT  --  Report as abuse
4825 wrote:
@morbas, for once you and I see eye to eye on an issue.

May 30, 2014 9:37am EDT  --  Report as abuse
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