I want to toss my two cents in here, and I hope I don't offend anyone too bad in doing so...
First: Bill I love and respect what you do wholeheartedly... and I want to encourage and support you in anyway I can...
Second: When picking a fight with a fast moving train the only solutions are: get out of the way, or ride it.
What's happening is called: "Industry Evolution Phase Four: Regulation and Consolidation" Troutman and Sanders talk about it at length, and even the great Peter Drucker addresses it in depth... In this case, it's e-cigs / tobacco vapors, but "Industry Evolution Phase Four: Regulation and Consolidation" is an organic process that happens to any industry once it reaches a certain size... For all intents and purposes, inevitable.
Basically, when enough revenue is moving around, the people who command the guns want a cut of it. It really is that simple.
It may happen in a few weeks, months, or even years... But it will happen, and this is what it will look like:
1. Imported Tobacco Vapors will pick up a mandatory 32% excise tax.
This will cause a surge in the domestic cottage industry...
2. Tobacco Manufacture Certificates and Licensees will become mandatory.
This will crush the domestic cottage industry, as almost no one will be able to get the certificates or licenses at first.
3. Tobacco Control Customs Warehouses will become mandatory as the import trade again swells.
This will channel excise, warehouse, custom fees back to the government as consumers watch prices soar (we'll all pay double for our liquid without too much complaint - ie. $.5/ml is delightful, $1/ml is doable, $2/ml becomes the market thresehold as E-cigs and Tobacco vapors pick up heavy luxury tax penalties...)
4. Tobacco Retailer licenses will become mandatory industry wide (and fairly easy to get), while the PACT act will be found to encompass E-Cigs / tobacco vapors ending Interstate Internet Tobacco Vapor trafficking completely as several buyers have their property ceased and are made examples of (yes, they will call it trafficking - and they will take cars, houses, levy huge fines - and a few high profile people will do jail time. This is merely done to set an example, once the example is set, people will begin to avoid internet purchases and look to local retailers) As the demand at local retailers increases:
5. Elaborate State by State Tobacco Tax stamps for Tobacco 'E-liquids' will be issued to licensed Manufacturers. Manufacturers will in truth be 'rebranders' adding private labels to products produced from a handful of companies able to get the very difficult to obtain production permits. Most of these will be in China, bolstered by large international and pharmaceutical interests. During this stage, the true producers of the liquids will dramatically increase MOQ's (minimum order quantities for rebranding) thus further consolidating the Domestic supply into a handful of labels large enough to meet minimum order volumes...
As we enter stage 5 of the consolidation, the handful of companies remaining will be faced with massive point of sale challenges and those that succeed will be either:
A. The Most Morally Bankrupt (corruption has a way of winnowing the pack, like viruses getting stronger after treated with antibiotics) ~ you'll see, some real ....ers with crap products will make it through the consolidation bolstered by exceeding low cost of production (market supply quality will decrease at first due to this)...
B. Extraordinarily Talented Administrators - As the tobacco stamps become Status Quo, the paperwork for interstate commerce will become nearly unfathomable to entrepreneurs whose talents of creativity are so often ill suited for the tedium of endless administration, and trivial paperwork...
C. Big Tobacco Interests As the consolidation settles, Big Tobacco will step in and capitalize with a line of hyper-addictive, additive laden E-Cig products, and using their existing POS distribution networks, will consume the industry, buying up the handful of businesses that survived the consolidation...
6. A handful of clever entrepreneurs will finally discover the import loophole in the FTC, TTB side of the regulation: "Properly labeled and disclosed, tobacco for personal use may be imported" and they will set up offshore corporations to avoid regulations, and regain control over internet trafficking... This will fail based on impious executive authority (it will get seized anyways, even though they're legal)
7. A second insurgence of the cottage industry will grow on a state by state basis with no interstate trafficking as vendors seek to avoid stiff interstate tariff, licensure, and trafficking penalties... These hobbyists will be tolerated at the 500 unit per month level without the need for tax stamps.
You can print this out, put in on your wall, and date those events as they occur in that order...
I applaud your efforts at holding back the storm and fighting the good fight, and I want to encourage you in every way possible to keep it up for as long as you can, as loud as you can. Whatever I can do to support you, let me know personally, and I will do whatever I can to try and boost the volume on your megaphone...
Simultaneously, I want to bring your attention to the only fight in this we actually have a chance of winning:
It's called the "1ml, 5ml, 10ml debate", and it is the single variable in an otherwise unwavering path. You see, excise will be made on invoiced shipment value... That's 32% right off the boat, the E-liquid will go into TCW's (tobacco control warehouses) and to get it out, you'll need to pay the excise.
But the tax stamps, and the cottage industry "500 Unit Cap" will be based on the definition of a unit.
Make sense? Why do all USA packs of tobacco contain 20 cigarettes and 1.2oz to 1.5ox of tobacco? Why do all cans of chewable tobacco contain 1.2oz to 1.5 oz of tobacco? It's because the threshold for the taxable unit of tobacco is ~1.5oz. Now bare in mind, that in some states, the unit tax is $2 per unit.
Now, brilliant market leading companies like BLU, Green Smoke, V2, V4l all love to sell the phrase "1ml = 1 pack of cigarettes" - - - As vapors, we all know that is total crap. The University of Catania study puts it closer to 3ml - 4ml, and many high voltage vapors (more vapor per puff) put it closer at 5-10ml = 1 pack.
So that's a 10 x variance of opinion from people all on the same team!
But imagine, the regulators will eagerly jump on the 1000's of pages of bogus 'affiliate driven' review sites all claiming that 1ml = 1pack, and 1ml could logically become the taxable unit.
At that level, a 10ml bottle, after excise and stamps would cost $35.
If 1ml becomes the taxable unit, the state by state cottage industry (surviving by staying under the 500 unit radar) will be completely destroyed... DIY will be destroyed... And big tobacco will not need to enter the industry as the whole thing becomes cost prohibitive to consumers and the supply chain is compromised...
I hope, someone like you can sway the game, as the UK NUDGE committee recommended: "We must incentivize this industry with tax exemptions." If you can convince the Domestic Oligarchy to act morally, and to incentivize this industry during the consolidation - you will have a place in history as the man who saved over 500 million lives this century... It is truly a windmill worth tilting at...
But, most likely, unless Ron Paul wins, the Oligarchy will protect itself, and its private ventures... The liberty bell cracked the day they made it, and imagining our ruling regime acting morally or in the interest of liberty is delightful, yet without precedent...
In my eyes, the only real chance we've got is that the appropriate studies can be completed during the regulation phase of the consolidation to push the taxable unit away from 1ml and up to 5ml.
If 5ml becomes the taxable unit, the industry will survive. It will still consolidate and be regulated, that is inevitable, but it will survive, thrive, and eventually flourish if 5ml becomes the unit - In fact, we will be well served and benefited by improved quality control and a stabilized supply chain... Once we pay our proper protection money, we will get the proper protection that money brings.
Of all the issues at hand, it is this single issue upon which all the others hinge, and Big Pharma and Big Tobacco will work together pushing for the 1ml taxable unit.
That is of course, unless a regime change occurs and we Americans remember that we all pledged our allegiance to protect and preserve liberty. If we can elect leaders who remember that our country is founded on liberty, there is still hope...
So personally I support you in your activism and tireless campaign, I know there still is hope... But simultaneously - I understand how a protection racket works... and it's very difficult to unseat entrenched racketeers. I think the best we can realistically look for is to try and position for favorable, (potentially survivable) terms of taxation.
We must also remember, that the market leaders in our industry are also eager for the consolidation... It serves their interests to crush the cottage industry, but they've all failed to realize - their immoral advertising campaigns serve to endanger their businesses as well...
