E-Cigarettes: To Tax or Not To Tax? Lawmakers Take a Look

217px-Cig_a_like--_2013-10-21_03-47Should e-cigarettes be subject to taxation in Utah? On Wednesday, lawmakers in the Revenue and Taxation Interim Committee, started exploring that question by taking a second look at the topic that popped up during the past legislative session.

Earlier this year, Representative Paul Ray (Republican – Clearfield) sponsored legislation to tighten e-cigarette regulations by requiring a license to sell such products. Criminal penalties for violations for licensees were also outlined and fines range from $300-1,000, with the possibility of suspension or revocation of their license to sell tobacco if the law is violated 3 or more times under Ray’s proposal.

HB 415 – Regulation of Electronic Cigarettes was overwhelmingly approved, but lacked a taxation provision.

John Valentine, chairman of the Utah State Tax Commission, suggested that committee members meet with industry officials to “form a coherent policy as to how to tax these various different elements and how you would actually apply it.”

Senator Howard Stephenson (Republican – Draper) questioned whether it would be wise to, through the implementation of a tax, discourage people from a device that could be a safer alternative to regular cigarettes. “Why should we deter that, especially if that becomes something that replaces tobacco?”

Jennifer Dailey, executive director of the Utah Academy of Family Physicians, said the issue of whether e-cigarettes are safer than traditional cigarettes is still up for debate. “For every study that says they’re significantly safer, there are as many studies that say they may not be. The New England Journal of Medicine found vastly larger amounts of formaldehyde in the e-juices and a potential link that it may be more cancerous in some cases.”

Dailey is especially concerned about youth exposure to e-cigarettes. “If you’re thinking about the 8th, 10th, and 12th graders, the children in your district, the children of your constituents. I would encourage you to ask yourself what level of formaldehyde do you feel is safe for those children? Because for my kids, it would be zero.” Dailey also fears e-cigarettes could lead some young people to start using traditional tobacco products. “It’s a significant concern because it does normalize that behavior.”

Aaron Frazier, executive director of the Utah Smoke-Free Association, believes that in the end e-cigarettes are a safer alternative to regular cigarettes.

“Nobody has been able to validate any sort of a gateway theory. It’s the gateway in the opposite direction – it’s people moving away from combustibles, not towards them.” Frazier also pointed to the study Dailey mentioned, saying it has been called into question. “The authors behind that have distanced themselves from their own study because the media blew it out of proportion and what was being reported was not actually the findings.” Frazier said that high formaldehyde levels were present due to the dry-puff phenomenon. “If the wicking material gets dry and somebody tries to use the device, it’s going to burn. Just like if you throw a steak on the grill, leave it on there for 20 minutes, and burn the living daylights out of it, it’s going to produce formaldehyde.”

Austin Healy, owner of Peak Vapor in Taylorsville, said he has witnessed several customers wean off of nicotine completely using e-juice. According to Healy, at least 20 percent of his consumer base does purchase zero nicotine products. “Why would we punish those that are working to get away from tobacco smoke? Why would we punish them and tax our product at a higher rate? It doesn’t make a lot of sense.”

The committee, having lost a quorum long before the discussion concluded, took no formal action and will continue deliberations throughout the rest of the year.

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