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E-Cigs Face Possible Taxation

The electronic cigarettes business in Syracuse is growing– and it is facing new potential taxes.

“The business is going fantastic,” said Emily King, owner of the Unique Cigs, a Cicero-based electronic cigarettes specialty store. Unique Cigs started to sell E – cigs on May 1of 2010. It now has seven more locations in the Central New York area and offers online shopping service.

The major reasons for the growth, say King and experts on cigarettes’ taxation,  are because of its cheaper price due to lower taxation and reportedly less harmful effect on people’s health. But the argument whether E-cigs should be taxed at the same rate as tobacco cigarettes are growing too.

Electronic cigarettes are battery-operated nicotine inhalers marketed as non-toxic nicotine delivery devices.

Tobacco taxes in New York are among the highest  in the nation.  New York City is ranked the second among the highest-taxation cities with a combined tax rate of $5.85 for a pack of traditional tobacco cigarette, according to New York State Department of Tax and Finance.  And the rest of the New York state are ranked the the seventh place with a combined tax rate of $4.35. In Onondaga County, the e-cigarettes are taxed at the regular sales tax of 8 percent of the product’s original price.

The growth of the industry has been dramatic. The Tobacco Vapor Electronic Cigarette Association estimates about four million Americans now use battery-powered cigarettes. But it is likely that governments will soon raise the taxation on electronic cigarettes, say some economists.

“I’m pretty sure that E-cigs will be taxed as tobacco cigarettes, because it’s less controversial to tax a commodity than the estate or the property,” said Donald Dutkowsky, an economics professor at the Maxwell School of Citizenship and Public Affairs at Syracuse University. He is an expert on cigarette taxation.

The higher taxation wouldn’t largely discourage the users because they are already addicted to the nicotine in electronic cigarettes, said Dutkowsky.

For the business owners, they’re hoping for more time until the formal regulation is established.

“I’ve been doing tobacco-related cigarette business for three years, including E-cigs. I never sold traditional cigarettes because the tax is too high, ” said Grant Lythe, owner of the Exscape Smoke Shop on Marshall Street at Syracuse University.

He wouldn’t be surprised if the E-cigs were to be taxed as the tobacco products, Lythe said, but he didn’t know what to do except wait. “I know there is a debate about it,” said Lythe. “But what can I do?”
(Mei Wang is a graduate student in magazine, newspaper and online journalism.)

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Posted in Spring 2014 | Comments Off