E-cig shops can thrive in hostile climate
News from citizensvoice.com
Despite one of the nation’s most oppressive tax climates for vape shops, Jay Dougherty sees opportunity in Pennsylvania.
One year ago, Gov. Tom Wolf approved a budget that levied a new 40 percent wholesale tax on the electronic cigarette and vapor industry. That means business owners like Dougherty have to cough up the state’s cut before customers even walk in the door, which dips heavily into cash on hand.
The new tax swept the legs from under start-up vape shops statewide.
Friends and colleagues in Orlando, Florida, where he worked for the last six years, warned him not to do it, but Dougherty, 27, longed for home.
Last month he opened Coal City Smoke Co. at 205 N. Washington Ave. in Scranton. He maintains his wholesale business as the national sales manager for Orlando Novelty.
He uses the trade knowledge he’s gained to mimic West Coast smoke shops, where he sells vape products, luxury cigars and hundreds of colorful glass pipes labeled for tobacco use only, but that tiptoe around a legal gray area.
A pending bill in the state house would replace the 40 percent wholesale tax with a 5 cent sales tax on every milliliter of e-liquid — or the solution often flavored and containing nicotine — used in e-cigarettes.
In a recent statement, state Rep. Jeff Wheeland, R-83, Loyalsock Twp., said the state should be encouraging such entrepreneurs, not taxing them out of business.
“Between the time I first introduced this bill last year and now, many small vape shops have closed and jobs have been lost,” he said. “It is time we took a smart approach to this budding industry and help it flourish, not penalize it.”
The U.S. Food and Drug Administration effectively bars marketing e-cigarettes as a smoking cessation tool, but many see it as just that.
“I haven’t had a cigarette in four years,” said Alex Clark, who smoked two packs a day for 21 years before trying e-cigarettes. “There are millions of people with a very similar experience.”
Clark is executive director of Consumer Advocates for Smoke Free Alternatives Association. Based in Des Moines, Iowa, the organization pushes public awareness for what it calls smoke-harm reduction and promotes legislation to ease the path to market for e-cigarette products.
It’s not an apples-to-apples comparison, but Pennsylvania vape taxes are among the highest in the country, he said.
Some states, or individual cities including Chicago, and Washington, D.C., have higher taxes on segments of the industry. But on balance, Pennsylvania’s is highest, he said.
Vaping undoubtedly can help people quit traditional cigarettes, but each person is different, Clark said.
It’s not as toxic as cigarette smoke — that’s the general consensus, said Dr. Tina George, a family doctor in Avoca. It’s mostly theoretical assumptions, but the absence of tar and carbon monoxide suggests it’s probably not as destructive, she said.
“We just don’t, at this point, have any long term data about the effects,” she said. “We don’t have long-term observational data to look at things like lung cancer rates or oral cancer rates, or cardiovascular data from the higher amount of nicotine — what’s tough is that we’re basing it off suppositions.”
Nicotine on its own has effects similar to caffeine, and it’s not considered categorically dangerous.
One health concern, George noted, is that e-liquid is made with preservatives propylene glycol and glycerin. It’s unclear just what those chemicals may do when heated and inhaled, as they are in an e-cigarette, she said.
Another downside, vaping normalizes smoking behavior. While federal law prohibits sale to anyone under 18, use among teenagers has risen at a time when teens are smoking cigarettes far less than they once did.
Regardless of lower toxicity levels, medical professionals resoundingly agree that it’s safer to abstain from both smoking and vaping.
Inside display cases at Coal City Smoke Co., space-age looking devices with names such as Smok and Ooze glisten with glass and metallic parts, glowing buttons and digital indicators.
A high-end kit could cost hundreds of dollars, but Dougherty said a former smoker could save a lot of money in the long run. A vial of some of the more popular e-liquid brands costs about $20 for 60 milliliters. That can last about a month, depending on use, he said.
His first couple weeks have seen young business professionals wander in looking for e-cigarette kits or supplies, while most college-aged customers want glass pipes.
It cost about $100,000 to get his Scranton shop — nestled in the heart of downtown across the street from the Lackawanna County Courthouse — off the ground, he said.
He plans to open a second under the same model in downtown Wilkes-Barre, in a shopping center off East Market Street.
Product diversity, he said, that helps his business succeed despite the stiff taxes.
Other items on his shelves, including glass pipes and luxury cigars, are not subject to Pennsylvania’s tobacco tax.
The young entrepreneur sees other opportunities budding.
Medical marijuana dispensaries, set to open next year across the state, sell the same vaporizer equipment for cannabis oil without the tax, although customers need a prescription to buy them.
Dougherty said he’s already in talks with several of newly licensed dispensaries about supplying them.
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