E-Cig Tax Increase In Philadelphia

Smokers who figured they could escape Philadelphia’s recently enacted $2-per-pack cigarette tax by switching to e-cigarettes could be in for a letdown.

City Councilwoman Blondell Reynolds Brown said Thursday that she would introduce legislation that would put a $2 tax on e-cigarettes and a tax on the liquid nicotine they use – with the levy going directly to the underfunded Philadelphia school district.

“When we know our school district is starving for revenue,” Brown said Wednesday, “every penny counts. We have to think outside the box and come up with new reoccurring revenue streams.”

The bill would also increase taxes on tobacco-related products, such as loose tobacco, from 36 cents an ounce to 50 cents. That revenue, which goes to the city’s general fund, now raises $700,000. With the increase, that tax would generate about $1.2 million.

Unlike the $2-per-pack tax, the e-cigarette tax does not need state approval. The city is allowed to tax items that the state does not already regulate and tax, such as traditional cigarettes.

It was not clear Wednesday how much revenue would be generated by e-cigarette taxes. Brown’s office did not have that information, and neither the state nor city Health Departments, nor the city’s Commerce and Revenue Departments, tracks the sales of e-cigarettes.

Brown says it’s an untapped resource.

“Sales [of e-cigarettes] are exponentially growing,” Reynolds Brown said. “We need to capitalize on that, especially knowing our school district is not being funded at appropriate levels.”

Sales of e-cigarettes nationwide have grown from $20 million in 2008 to $1.5 billion this year, and are expected to keep growing.

Philadelphia could be the first major city to impose such a tax. Minnesota and North Carolina now tax e-cigarettes.

Brown’s proposed legislation calls for electronic cigarettes, described as “any electronic or mechanical device that delivers nicotine via vapor for inhalation,” including e-cigarettes, e-cigars, and e-hookahs, to be taxed at $2 each. The liquid nicotine that goes into the electronic device would be taxed at 50 cents per milliliter, not to exceed $5 per transaction.

E-cigarette users tend to use between one and two milliliters per day, said Ray Ros, general manager of Love Vape on South Street. Users usually buy the 15- or 30-milliliter refill bottles.

“This would really hurt our business,” Ros said of the tax plan. “We make most of our money in the [nicotine] juices.”

Ros said that when e-cigarettes first came out, they were a cheaper alternative to cigarettes. After Gov. Corbett signed into law the $2-per pack tax on Sept. 24, Ros saw a slight increase in smokers moving to e-cigarettes.

If e-cigs become more expensive than cigarettes, Ros said, it “might drive people back to smoking cigarettes.”

Even if Council approves the bill, the School Reform Commission would have to approve. If approved by Council and the SRC, the legislation would go into effect July 1, 2015.

On Wednesday, SRC Chairman Bill Green was supportive of the idea.

“Any revenue opportunity that is supported by City Council, we will pursue,” he said.

Mayor Nutter supports an e-cigarette tax, his spokesman, Mark McDonald, said Wednesday.

Nutter signed bills in April that outlawed sale of e-cigarettes to minors within the city and prohibited vaping in workplaces, bars, restaurants, and other public places.