In a rush of late night votes sent through before the session let out, Washington state legislature passed a new vape sin tax. The bill would charge customers purchasing both closed and open vape systems, and force shops in the area to completely reconsider their sales plan.
Seattle Washington has a plethora of local brick and mortar shops, with Yelp listing 131 business that sell vape products alone. With a population well over 7 million, Washington has enjoyed a healthy growth rate of 1.27%, ranking it 8th in the US overall.
The new vape sin tax, which plans to tack a $0.27 per milliliter tax on closed vape systems like the Juul, and a $0.09 per Milliliter tax on open systems, could force current and to-be vapers back to cigarettes.
The newly proposed sin tax has thrown local shops a huge curve ball. Owner of Future Vapor, a Seattle-based store, said the new tax will force them to shut down completely.
The bill, a response to the recent hike in underage use, will target all tobacco products including cigarettes. But unlike smaller B&M vape shops who simply do not have the funds to make it through such a tax hike, Big Tobacco will likely make it out virtually unscathed.
Replacement pods for the Juul will receive a $1 increase in price, while a 60ml bottle of e-juice will now sell for $5.40 more. The new charge is not dependent on nicotine strength either, and will treat bottles of 0mg and 18mg the same.
At first, an extra few bucks on a bottle of e-liquid may not seem like much. But in order for shops to remain profitable, and maintain the standard 50% wholesale to direct sale margin, 60mls could sell for as much as $30 a pop. The $9 wholesale tax on each and every container of liquid will surely bring the industry to its knees.
Washington Rep. Pollet feels that concerns over the bill are a bit inflated, and believes that the “dirt cheap” vape products will easily make it through the new sales tax.
As it stands now, vaping is far cheaper than a smoking habit. The average vapers can expect to save around $1,000 a year. With the new added expense, vaping will no longer be the cheaper option, and the two will likely cost about the same.
It’s unclear exactly how the bill will effect small shop owners across the board. Retail outlets and convenience stores selling all-in-one products like the Sourin Edge will likely drop e-cigs altogether, and rely on their other on shelf products to keep making profit. Vape shops will be forced to consider the cold hard reality that without e-juices on the shelf (that usually account for a majority of total sales), shutting down may be the only sensible option left on the table.
Stores with an online presence wouldn’t be able to move to a pure digital platform in order to stay competitive either. Any item sold through a business in Washington would face the same tax. Drop shipping is the only possible workaround, as businesses are not required to stock product themselves, and can instead rely on others outside of Washington.
A move to another state will likely be the only option for those looking to stay alive, an unexpected cost with its own set of risks. It’s unclear how many small B&M locations will survive if any, but rest assured major Big Tobacco backed retail chains will make it through virtually unharmed.
This is a bad deal for vapers and small business owners in Washington state.
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