Punitive e-Cig Tax Could Ax 300 Shops, 1,500 Jobs

Member Group : Commonwealth Foundation

Bill Would Reverse 40-Percent Retroactive Tax Poised to Crush Pa. Small Businesses

August 8, 2016, Harrisburg, Pa.—Chris Hughes of Fat Cat Vapor Shop in Montoursville is preparing to close his doors for good after Gov. Wolf and lawmakers imposed a 40 percent, retroactive tax on his inventory, effective October 1. Hughes is one of many vape shop owners statewide whose businesses won’t survive the massive tax hike—part of a $650 million tax package passed last month.

Now, one lawmaker is moving to save shop owners like Hughes from losing their livelihoods. Rep. Jeff Wheeland (R-Williamsport) plans to introduce legislation to replace the 40 percent tax with a 5-cents-per-milliliter tax, similar to what exists in North Carolina and Louisiana.

"This isn’t simply business owners concerned with a slight tax increase," Hughes said. "This is literally our businesses, our livelihoods, and our employees’ livelihoods being crushed. Imagine if you were told that on October 1, you would have to pay a 40 percent tax on everything you own. This is a bullseye on our specific industry, and I’m glad lawmakers realize this and are working to reverse it."

According to industry estimates reported by the Pocono Record, 92 percent of the 300 vape shops across the state could close as a result of the 40 percent wholesale tax coupled with new federal regulations. As many as 1,500 full-time jobs could be lost as a result.

Wheeland’s co-sponsorship memo notes, "If these small businesses do decide to close and lay off workers, not only will the new vape tax revenues fall short of estimates, but the state may lose significant sales and income tax revenues."

Shop owners spanning the state say the new tax will force them out of business:

• "It will result in shops closing, that means more unemployment, that means their families aren’t going to have a source of income."
—Holly Loupe, who, along with her husband, runs vape shops in Altoona, Johnstown, and Dubois.

• "This is pretty much a catastrophe for us."
—Michael Curry, owner of Life Smoke Vapors in York.

• "The likelihood is that probably all three of my businesses will end up closing."

—Dave Norris, owner of Blue Door Vaping Shops, with locations in Harrisburg, Etters, and York.

• "It’s a $40,000 check I can’t write."
—Kerry Medina, co-owner of Vapor Café in Ephrata.

• "The state just put a death nail in this business."
—Vicki Shiner of 4 Humors Emporium in Lancaster.

• "If you have $100,000 in inventory, you have to write a check for $40,000. I don’t know of any company in the area that would be able to do that."
—Josh Sturtz, manager of Vaporium 814 in Johnstown.

• "I anticipate that virtually all specialty vapor businesses will eventually close as a direct result of this tax and, currently, there are about 300 such shops in Pennsylvania, that provide about 1,500 people with full time jobs."

—George Predmore, co-owner of Mountain Vaporz in Tannersville.

"Here’s what this punitive tax says to entrepreneurs: Think twice before you start your business in Pennsylvania," commented Bob Dick, senior policy analyst with the Commonwealth Foundation. "Unlike Harrisburg’s spend now, tax later approach, businesses actually plan based on their revenue and assets. Hitting vape shop owners with a 40 percent retroactive tax is the epitome of picking winners and—in this case—losers. This year it’s vape shop owners, but what industry will be sacrificed to feed Harrisburg’s spending addiction next budget season?

"Pennsylvania should encourage job growth, not throw small business owners out to the curb. We urge lawmakers to act now to save the livelihoods of Chris and other small business owners before it’s too late."

Bob Dick and other Commonwealth Foundation experts are available for comment. Please contact Gina Diorio at 862-703-6670 or [email protected] to schedule an interview.

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