Vape tax clears Senate committee

Vape tax clears Senate committee
The Senate Ways and Means Committee voted to advance SB 5986 that would create a tax on vaping products, also known as e-cigarettes. Photo: freepik.com

A Senate proposal to tax vaping products, also known as e-cigarettes, cleared the Ways and Means Committee on April 2 after some revisions. Although framed as a mechanism to fund cancer research and discourage vaping by teenagers, critics have argued that SB 5986 will harm small businesses that primarily sell those products. Some committee members have also questioned whether the bill will have any practical effect on illegal usage.

“We’re actually disincentivizing the one thing that could actually be helpful for getting off of cigarettes,” Sen. Bob Hasegawa (D-11) said, calling the bill a “misguided policy.”

“If we try to pride ourselves on evidence-based policy, we’re going in the wrong direction,” he added.

Under the original version, SB 5986 would impose a tax on vapor products of $.05 per millimeter of solution and a $.40 per ounce tax on heated tobacco products. The revenue would be split 50-50 between the Andy Hill Cancer Research Fund and a new public health services account.

Two amendments to the bill made the following revisions:

  • Revises the heated tobacco product tax based on grams, rather than ounces;
  • Clarifies that the tax is on the milliliters of solution not the taxable sales price;
  • Stipulates that the Foundational Public Health Account money can only fund local public health;
  • Allows the governor to make tax compacts with tribal governments regarding vapor products;
  • Directs the state Department of Revenue to create an estimate of new retail sales and business and occupation (B&O) taxes collected as a result of the legislation; and
  • Removes a provision which mandates that delivery licensees collect the tax.

At the April 3 meeting, sponsor Sen. John Braun (R-20) said “there is still some work with stakeholders on the rates and the tier approach to make sure we have the right balance and right approach to serve all the stakeholders as much as possible.”

According to the bill’s fiscal note, the tax would generate an estimated $38 million starting this biennium through 2025.

In the House, a similar proposal via HB 1873 sponsored by Rep. Gerry Pollet (D-46) cleared the House Committee on Finance Mar. 14 and has been referred to the Appropriations Committee, but no public hearing has yet been scheduled.

SB 5986 has now been referred to the Rules Committee.

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