Effective August 1, 2010 a new law stating that E-cigarettes must be taxed as an OTP item in the state of Minnesota.

[JustJulie]

I see it as a state that has conceded that the FDA won't succeed in getting them classified as drug delivery devices, and is therefore pricing the product out of the reach of all but the most avid users.
It is just a different step in the wrong direction to me, and indicates that there is no rhyme or reason to their logic. The only conclusion I draw is that no matter what we do, they will try to find a way to stop us using them. Even if it means pricing us out of the market. It's an utter disgrace and we need to fight it all the way.

I don't think this was a deliberate swipe at e-cigs . . . Minnesota basically has an existing tax structure, and they figured out a way to fit new products into that tax structure.

The problem is the policy that DISCOURAGES harm reduction. In my opinion, states (and the federal government) should be going out of their way to provide incentives for reduced harm products rather than pricing them so that they're as expensive as the most deadly of the tobacco products.

Here's an eye-opener: http://tobaccofreekids.org/research/factsheets/pdf/0357.pdf

Raise the state cigarette tax rate and raise all other tobacco product tax rates to parallel levels. If it does not make sense to raise the cigarette tax rate (because of a recent increase to a very high rate), raising the other state tobacco product tax rates to match the state cigarette tax rate can still bring in significant amounts of new revenue. To match a $2.00 cigarette tax rate, the OTP tax rate should be 85% of wholesale price, and individual tax rates on different types of tobacco products can be established that are the same as the tax for cigarettes on a per-package or per-dose basis.

Unconscionable.

 

[skinny]

Wow Julie--just wow!
That doc you posted from Tobacco-kids makes me feel like I've been punched in the stomach!!!!
It amounts to extortion if you ask me. That doc right there lefts the vale on what the government/powers that be are really doing. It's all about getting money (and as much as they can!) out of the regular guy--it has nothing to do with helping regular people.
If this sort of thing is going on for tobacco--you know it is happening across the board in every faction of our lives.
What our forefathers started so long ago for the good of people and this country has now turned into a raging monster that is out of control.
We the people of this country NEED to wake up and put a stop to all of this (it's more than money folks; it's about control, too) before it's too late. Soon we will be living in one of those Sci-Fi movies like Minority Report or the like...if it's not too late already

 

[Bill Godshall]

Julie wrote:

Here's an eye-opener: Error: Document Not Found

Quote:
Raise the state cigarette tax rate and raise all other tobacco product tax rates to parallel levels. If it does not make sense to raise the cigarette tax rate (because of a recent increase to a very high rate), raising the other state tobacco product tax rates to match the state cigarette tax rate can still bring in significant amounts of new revenue. To match a $2.00 cigarette tax rate, the OTP tax rate should be 85% of wholesale price, and individual tax rates on different types of tobacco products can be established that are the same as the tax for cigarettes on a per-package or per-dose basis.

This statement by CTFK is outrageously false, as a $2/pack tax on cigarettes accounts for 35% of the wholesale price of cigarettes (in states where the cigarette tax is at or around $2/pack). Even the highest state cigarette tax (NY at $4.35/pack) accounts for less than 50% of the wholesale price of cigarettes in NY. It also appears economically impossible (no matter how high cigarette tax rates are increased) for any state's cigarette tax to ever account for 85% of the wholesale price.

Unfortunately, CTFK/ACS/ALA/AHA have duped some state legislatures including MN (and are trying to dupe others) to tax Other Tobacco Products at more than double the rate that cigarettes are taxed (as a percentage of wholesale price).

Here in Pennsylvania, CTFK/ACS/AHA/ALA and the sponsoring legislator (who is my state rep and who knows me very well) made similar false claims last year (i.e. that a 70% tax on OTP was necessary to tax OTP at the same rate as cigarettes, which are now taxed at $1.60/pack) when urging the PA legislature to establish a 70% tax on all Other Tobacco Products.

After I informed state legislative leaders (and members of the Senate and House Finance Committees) that PA's cigarette tax was less than 30% of wholesale price, the sponsors of the legislation (and CTFK/ACS/AHA/ALA) sharply lowered the OTP tax rate in their legislation (to 30% of wholesale price), while continuing to insist that OTP should be taxed at the same rate as cigarettes.

In sharp contrast, I've been urging the PA legislature to enact a tax on OTP that is significantly lower than the state's cigarette tax rate because OTP products aren't as harmful as cigarettes, don't impose nearly as many healthcare costs on state/local taxpayers as do cigarettes, and because taxing OTP at the same rate as cigarettes discourages smokers from switching to far less hazardous smokefree tobacco alternatives.

My apologies for not discovering sooner that the MN legislation (that was touted as legislation to ban the sale of e-cigarettes to minors) also contained a clause (in Section 2) that amended the legal definition of tobacco products (to include e-cigarettes and e-liquied) for tax purposes, as the legislation never actually stated that it would impose a tax on e-cigarettes.

Also, the MN e-cigarette legislation was being considered the MN legislature at the same time we were fighting proposed sales bans in MD, IL, NY and a proposed usage ban in MD.

The MN tax is also one of the first times that a state has imposed a tax on a tobacco product when enacting non-tax or non-budget legislation.

I think that online retailers who sell e-cigarettes to customers in MN aren't legally required to pay the 70% OTP excise tax. While some state Depts of Revenue have tried to collect state cigarette excise taxes from customers (who live in the state) who bought cigarettes from online retailers (located in other states and/or on Tribal reservations), I'm not aware of any states trying to collect excise taxes on OTP that were purchased online from other states.

 

[kristin]

Bill, do you think that there is any way we can petition Minnesota to reverse this tax on OTP? Can they be reasoned with? Should we start a campaign? Or is it simply too late?

 

[Bill Godshall]

Following up on my previous post, the world's largest online cigar retailer (Cigars International) moved to PA (from NY) specifically so it could avoid paying any state cigar taxes (except sales tax) because PA doesn't have an excise tax on large cigars (or smokeless tobacco). I suspect that at least 90% of Cigars International customers don't even live in PA, and thus avoid paying their own state's cigar excise tax.

The huge discrepency in cigar tax rates from one state to another has fueled much/most of the growth of online cigar sales.

 

[Bill Godshall]

Per Kristin's inquiry, although I don't think we'll be able to convince MN officials to lowere the e-cigarette tax rate (as that train left the station several months ago), I think its a good idea to inform the MN governor and legislators (and the media) that MN outrageously taxes the most hazardous tobacco product (cigarettes) at less than half of the rate than it taxes the least hazardous tobacco products (e-cigarettes and smokeless, as well as cigars, that are also less hazardous than cigarettes).

This is a problem I've been exposing and opposing for the past several years (i.e. taxing far less hazardous OTP at a higher rate, or even a similar rate, than cigarettes). While a revenue neutral solution would be to urge certain states (about 15 states now tax smokeless at a higher rate than cigarettes) to increase the cigarette tax rate and decrease the smokeless/OTP tax rate, I still haven't been able to convince any tobacco manufacturers or distributor/retailer associations (who now understand and support tobacco harm reduction) to lobby for that type of change (as they don't want cigarette taxes to be increased).

 

[rothenbj]

Bill, if you could clarify. How can you apply a tax to E cigarettes as a tobacco product and not tax pipes in the same way? I can fully understand a OTP tax on the liquid (well, I can almost understand), but the hardware itself? That device has a better chance of never becoming a tobacco product than a pipe does, unless the pipe is being purchased for... never mind. To me, they are two separate products unless sole as a kit with nic juice included.

 

[skinny]

Mr. Godshall,
Do you know exactly what they are taxing? is it everything e-cig related including: chargers, batteries, cases? Or is it the juice or the catromizer? How do they determine what/how much tax is, and for what?

Hope that makes sense

 

[Bill Godshall]

It appears clear that the 70% tax law only applies to e-products that contain nicotine derived from tobacco (which is basically just prefilled cartridges and e-liquid that contain nicotine derived from tobacco).

The tax law doesn't appear to apply to atomizers, rechargers, modification products or other e-paraphernalia, nor does it apply to nicotine-free e-cigarettes or e-liquid, nor does it apply to prefilled cartridges or e-liquid containing vegetable (VG) derived nicotine.

So if suppliers of starter kits repackaged and marketed them as two separate items (that are suggested to be purchased together and that are displayed together), only the cartridges containing nicotine derived from tobacco would be taxed.

Also, the entire issue of "wholesale price" is uncertain, as that could mean the price a tobacco/e-cigarette retailer pays for the product, the price the importer pays for the product in China, or perhaps there isn't even a wholesale price (if the importer who purchased from the manufacturer in China is also the retailer of the product in MN, that eliminates all the middle-men "wholesalers").

While wholesale prices of tobacco products have a long tradition and are commonly known, and while some/many state's have minimum pricing laws for cigarettes that mandate a minimum "wholesale price", there is no broadely recognized "wholesale price" within the fledgling e-cigarette industry.

The new MN law also requires all e-cigarette retailers in MN to obtain a license to sell tobacco products, which all other tobacco retailers have been required to have, and which can usually be obtained by simply obtaining, fillinging out and submitting the application (probably to the Dept of State) and paying a modest annual fee (which is just $25 here in PA for a cigarette retail license, while OTP retailers aren't required to obtain a license here in PA, except in the City of Philadelphia).

My understanding of state tobacco tax collection laws is that States cannot require out-of-state online tobacco retailers to pay that state's tobacco excise taxes (for tobacco products sold online to consumers located in that state). As such, out-of-state online e-cigarette retailers would/could not be required to pay MN tobacco excise taxes.

And while some State Rev. Depts have taken actions to collect unpaid state cigarette excise taxes (by requesting consumer sales data from online cigarette retailers located in other states and/or Native Reservations, and then by billing the consumer directly for the taxes owed), I'm not aware that any State Rev. Dept has ever attempted to collect unpaid state excise taxes on Other Tobacco Products.

 

[rothenbj]

Thanks Bill, that makes more sense.

 

[skinny]

Yeah Bill, thank you!
I think that covers it all pretty well. If you come up with any more please let us all know

 

[Thulium]

This statement by CTFK is outrageously false, as a $2/pack tax on cigarettes accounts for 35% of the wholesale price of cigarettes (in states where the cigarette tax is at or around $2/pack). Even the highest state cigarette tax (NY at $4.35/pack) accounts for less than 50% of the wholesale price of cigarettes in NY. It also appears economically impossible (no matter how high cigarette tax rates are increased) for any state's cigarette tax to ever account for 85% of the wholesale price.

With all due respect, Bill, I think you are mistaken here. $2/pack accounts for 35% of the RETAIL price of cigarettes, not wholesale.

 

[Tiberius Jonez]

I live in MN and I can tell you Tim Pawlenty is a right wing yes-man and pawn of lobbyists.

Thankfully, his disastrous term (he's made Jesse Ventura look like a genius) as governor is rapidly approaching its end.

Good riddance!!

 

[berty]

I live in MN and I can tell you Tim Pawlenty is a right wing yes-man and pawn of lobbyists.

Thankfully, his disastrous term (he's made Jesse Ventura look like a genius) as governor is rapidly approaching its end.

Good riddance!!

While I disagree with this piece of legislation as it relates to e-cigs, Pawlenty has served the public well here with regard to reducing spending, or more acuratly fighting others to hold the line on spending. The vast majority of Minnesotans would strongly disagree with the "Jesse Ventura analogy" as polls following Ventura's term would substantiate. Pawlenty was elected, and reelected, in a very liberal leaning state for a reason. It was his decision not to run for a third term even though the polls six months ago favored him when compared to the likely candidates he would face. He likely has national political goals he decided to pursue.

This is not meant to start a political discussion, (it would serve no purpose since our country is clearly divided fairly equally between left and right of center) but to submit that the opinion of Mr./Ms Jonez does not represent Minnesotans as a whole. IMHO, their analogy does not even represent the majority opinion of Minnesotans. I can say with some certainty it does not represent small business and the middle and upper socioeconomic class here in the land of 10,000 entitlement programs and taxes… I mean lakes.

 

[Maialeth]

Time to stock up on unflavored nic and learn diy for those in that state.

 

[Stubby]

It's a sure bet that if the FDA lose the case and e-cigs are classified as a tobacco product the states will be pushing hard to tax them. MN is just the first. You also have to think about if e-cigs are rolled in with other tobacco products into the PACT act. It would then be illegal to ship via USPS so all shipping would be by UPS. Plus distributers would have to collect all state taxes. That is what has happened with smokeless tobacco. It's been a blow to Swedish snus users. It's still legal, just a lot more expensive, especially for states with high smokeless tobacco taxes.

 

[sailorman]

......

This is not meant to start a political discussion, (it would serve no purpose since our country is clearly divided fairly equally between left and right of center) but to submit that the opinion of Mr./Ms Jonez does not represent Minnesotans as a whole. IMHO, their analogy does not even represent the majority opinion of Minnesotans. I can say with some certainty it does not represent small business and the middle and upper socioeconomic class here in the land of 10,000 entitlement programs and taxes… I mean lakes.

It occurs to me that the middle class in MN and, for that matter, the rest of the country is shrinking to near extinction and the upper socioeconomic class has, by definition, always been a minority. Therefore, the combined population of both classes are, or will soon amount to, no more than a minority. The day is fast approaching, if it's not already here, that the combined population of the middle and upper socioeconomic classes will represent a mere minority of the population as a whole.
Welcome to the new Amerika. Designed, implemented and trickled down to you over the last 30 years.

"There is no class warfare in America. It's already over and our class won"
Warren Buffet

 

[Vocalek]

Just out of curiosity, where was the state planning on sticking the tax stamp? On each battery? Each cartridge?

 

[ckc]

City attorney working on controlling E-cigarettes - faribaultcountyregister.com | News, Sports, Information on the Blue Earth region - Faribault county Register

“Right now there is no regulation to enforce the use of E-cigarettes,” says Wells city attorney David Frundt. “As far as the Legislature is concerned, they are cigarettes.”

 

[Vocalek]

What does this mean? “Right now there is no regulation to enforce the use of E-cigarettes.” Does he want to force smokers to use e-cigarettes instead of tobacco cigarettes? Wow, that would be a switch in attitude.