Is Washington DC’s Struggling E-Cigarette Market a Sign of Things to Come?
With a growing number of US states mulling excise taxes for electronic cigarettes, we’re left wondering how the extra cost will affect the vaping community and e-cigarette businesses. If Washington DC, which has already adopted a 67% tax on all vaping products in October, serves as an indication, the future looks very grim.
The 67% tax puts electronic cigarettes, e-liquids and all other vaping products in line with tobacco cigarettes, even though there is actually no tobacco in them. The tax was first introduced in Mayor Muriel Bowser’s budget back in June and was estimated to bring in around $380,000 per year in revenue. But judging by the way things are going right now, there won’t be anyone left to pay it.
Even before the high excise tax took effect on October 1st, 2015, industry experts and vape shop owners warned that it would ruin most small businesses, but people didn’t actually realize how how bad things had gotten until shops started closing down.
D.C. Vape Joint, the first e-cigarette store in the District, was among the first to shut its doors. “We ran the numbers and it just didn’t make sense to stay open,” said co-owner Erik Miller. “We would have had to invest in other products. It’s not like we were making a ton of money. We didn’t want to risk it.” The shop used to employ four people.
Others, like Fadi Khalaf, owner of a small vape shop in downtown Washington, don’t know how long they’ll be able to stay open. “That shuts us down,” Khalaf told The Daily Caller about the 67% tax. “I don’t make nearly enough profit to sustain that.” In September, he started preparing for the worst, asking his real estate agent for options to get out of his lease if the need arises, terminating his cable subscription with Comcast and talking to his suppliers about a potential shut down.
Sean Robinson, who owns District Vape Electronic Cigarette Vapor Boutique, has opened another shop in District Heights, Maryland, to absorb the loss of his DC shop and also started selling pipes and other glassware, which aren’t susceptible to the excise tax.
Despite what official might claim, small business owners claim that the 67% tax isn’t designed to produce extra revenue to cover the funding for homelessness initiatives. “The 67 percent is meant to shut you down. It’s not meant to generate revenue,” Miller said. “If you’re really trying to make revenue, tax it at 20 or 30 percent. That’d be annoying, but we could survive.”
“The city is basically just telling us to leave,” Khalaf also said. “They specifically targeted thevape shops. They’re not attacking the 7-Eleven.” Convenience stores usually carry brands like VUSE and MarkTen, produced by tobacco companies like R.J. Reynolds and Altria, which can afford to pay the high tax rate.
“The e-cig industry used to be all small businesses and now corporations are hopping on,” Miller confirmed. “When (the government) regulates, it’s only the corporations who can weather the regulations.”
Another problem Washington vape businesses are facing is that many wholesalers aren’t even willing to work with them because the burden of the 67 percent excise tax will fall on them. For example, if they were to sell a $100 mod to a DC shop, they would have to pay another $70 to the city for this privilege. The excise tax is imposed on the first person that possesses or sells vapor products in Washington, but if the wholesaler happens to be based outside the district, the tax falls on the retailer.
To make matters worse, it’s not just the e-cigs and e-liquid that are taxed, but also the batteries and decorative components like drip tips. If it’s related to vaping, you have to pay the city 67% of its cost.
Interestingly enough, local authorities have claimed that they are also taxing vape businesses in the name of public health, but as Sean Robinson points out, that is very unlikely. “One thing I think is ironic is that there’s no law saying I can’t sell e-cigs to minors, but they tax me first. That’s telling,” he said.
Photo: Wikimedia Commons
