What is vape tax and why do the government tax vaping products?
According to Wikipedia “An excise, or excise tax, is any duty on manufactured goods that is levied at the moment of manufacture rather than at sale. Excises are often associated with customs duties (which are levied on pre-existing goods when they cross a designated border in a specific direction); customs are levied on goods that come into existence – as taxable items – at the border, while excise is levied on goods that came into existence inland.”
The Irish Heart Foundation is asking the Government to consider an excise tax of 6c per millilitre of e-cigarette liquid. This will lead to 10 to 25 percent be adding to the price. Chris Macey, head of advocacy at the Irish Heart Foundation, said that putting a larger increase on tobacco would help to stop vapers to switch back to smoking.
Macey said: “The smoking rate among 15 to 16-year-olds has been cut from 41% to 12% over a 20-year period.”
“We cannot give up these hard-won health gains by allowing a new generation of children to become addicted to nicotine through an e-cigarette industry that is largely controlled by big tobacco.”
Okay, now we get to vape taxing methods. There are different kinds of vape taxing methods. Authorities tax based on price, volume, or with a bifurcated system that has different rates for open and closed tank systems.
What is the simplest way to tax goods? Taxation based on volume because it does not require or expensive tax administration.
Why do governments tax vaping products?
Excise tax is applied for different reasons on products:
- Raising money for the taxing authority
- To change the behaviour of those who are being taxed
- To balance environmental, medical, and infrastructure cost that are created by the use of the product
Tobacco products have been a target for excise taxes for a long time. Why? Because the harm that smoking causes harm of smoking puts costs on the whole society. The government then taxes these products because it is a source of income to them and if smoking decreases there will be a financial shortfall and they will have to reduce their spending.
How does it work?
Most U.S. consumers pay a state sales tax on the vaping products that they buy, so the state governments benefit from the vape sales, even before the excise tax is added. In many other countries, consumers will pay VAT, this works the same as sales tax.
Let us have a look at the different excess taxes you get:
Retail tax on e-liquid – This is only on nicotine-containing liquid or on all e-liquids. Because it is accessed per milliliter the sellers who sell the e-liquid in bottled form are more affected than the sellers who sell finished products like pod vapes.
Wholesale tax –This type of tax is seemingly paid by the distributor or the retailer and then the cost is passed on to the consumer in the form of higher prices. The wholesale tax may only be assessed on products that contain nicotine or it can also apply to all e-liquid.
From time to time these excise taxes can go with floor tax. Floor tax is when the state collects taxes from all the products the store has on hand on the day the tax comes into effect.
Vaping taxes in the United States
“There is no federal tax on vaping products. Bills have been introduced in Congress to tax vapes, but none has gone to a vote of either the full House or Senate yet.”
There you have it guys, you have now learned what vape tax is and why it is paid. Yes, I don’t think anyone likes to pay taxes, but in order for you to sell your vape products or to purchase and enjoy them as a consumer, you will have to pay the tax.