Proposed bill in North Carolina would tax e-cigarettes at US$0.05/ml of liquid nicotine solution used in product's cartridges, compared to US$0.45/pack tax on traditional cigarettes

Nevin Barich

CHARLOTTE, North Carolina , May 15, 2014 (Charlotte Observer) – Should North Carolina tax e-cigarettes as a tobacco product?

It wouldn't under a bill proposed by one of the country's largest tobacco companies.

The measure, part of a larger bill on tax law changes, was approved Thursday by the House Finance Committee and is expected to go to the full House next week.

That's where a Charlotte lawmaker, backed by health advocates, hopes to the slow the measure that defines e-cigarettes as a "vapor" product, not a tobacco product.

"This is a bill that has potential health implications that we don't know," said Rep. Becky Carney, a Charlotte Democrat.

E-cigarettes have come under growing scrutiny as their popularity has grown.

Bloomberg Industries has projected e-cigarette sales could reach $1.5 billion this year and surpass traditional tobacco products in sales within a decade. The federal Food and Drug Administration is considering regulations.

Critics say e-cigarettes can increase nicotine addiction among young people and even lead to use of more traditional tobacco products.

Advocates, including the tobacco industry, say they offer an alternative to tobacco use, which has proven health risks.

In North Carolina, the issue is taxes.

The bill would tax the products at 5-cents per milliliter of the liquid nicotine solution used in e-cigarette cartridges. That's much less than the 45-cent a pack tax on traditional cigarettes.

The vapor bill first appeared Tuesday at a meeting of a House-Senate study committee, proposed by the Winston-Salem based Reynolds America, the nation's second-largest cigarette producer.

"We believed that if taxed at all, a tax (on e-cigarettes) should be a reasonable tax like the one proposed," David Howard, a spokesman for R.J. Reynolds Vapor, said Thursday. "They shouldn't be taxed at a rate that would discourage current adult smokers from considering switching to smoke-free alternative products."

On Thursday Carney came within one vote of pulling the vapor measure from the large tax bill. She wants the measure to be considered on its own and plans to try again when the bill hits the full House next week.

"Before we just move ahead and declare this vapor product is a non-tobacco product, let's see what the FDA defines it as," she said in an interview. "And if we tax it, is 5 cents enough?"

Minnesota is the only state that currently taxes e-cigarettes. Like tobacco products, they're subject to that state's tobacco tax, or 95 percent of the wholesale cost. Washington state is considering a tax of 75 percent.

Health advocates say e-cigarettes aren't all that different from traditional cigarettes.

"The fact of the matter is they're nicotine delivery systems, and nicotine is derived from tobacco," said Pam Seamans, executive director of the N.C. Alliance for Health. "It is liquid nicotine and nicotine is derived from tobacco. It's a tobacco product."

Betsy Vetter, director of government relations for the American Heart Association, said the bill could make access to e-cigarettes easier for young people, even though a 2013 law makes it illegal to distribute the products to minors.

N.C. officials estimate the proposed e-cigarette tax will bring in $5 million by next year.

David Powers, a Reynolds vice president, told the House-Senate committee Tuesday that the company wants a "fair" tax. "It's eventually going to get taxed," he said of the product. "We want it to be done the right way."

State Rep. Julia Howard, a Davie County Republican who chairs the Finance Committee, supports the proposed tax.

"I don't now why anyone would oppose it," she said of the measure. "It's an alternative to tobacco. That's the message from the health advocates -- try to get away from tobacco...

"And (the industry is) asking to be taxed at a certain rate."

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