As we all know, electronic cigarettes or e-cigs are one of, if not the fast-growing segments of the nicotine products market. This summer, lawmakers in North Carolina will be debating two E-cigarette related proposals in their state house, and although “technically” there are two debates, both of these debates have relatively the same outcome; to raise much-needed state tax revenue.
The first of these two debates is over whether or not to legalize the sales of electronic cigarettes in county jails, where the goal of this law requested by North Carolinas’ Sheriffs’ Association, would be to nullify a law passed earlier this year banning county inmates from possessing any and all electronic cigarettes and/or vapor related products. This new measure which has been quietly snuck into house bill 1133 specifically gives only county jails and “not” state prisons the authority to sell e-cigarettes and other smoking “cessation” items like nicotine patches or lozenges, which has the potential of raising millions in desperately needed revenue for the ever increasing costs of running, improving and maintaining county jail operations.
Smoking of any kind has been banned from all North Carolina jails and prisons since March of 2010. Since then, according to Eddie Caldwell Director of the North Carolina Sherriff’s association, “jail staff have to contend with inmates suffering from nicotine withdrawal.” Which can potentially cause unneeded conflict between jail staff and inmates. Some county jails have turned to electronic cigarettes as the solution, and as Caldwell further states “There are a number of jails across the state that allow their inmates to purchase these e-cigarettes.” Much of the reasoning behind this decision according to Caldwell is officer safety, and that “traditional cigarettes create a risk of fire, the risk of secondhand smoke and other things like that,” Caldwell said, “that at least as far as I’ve heard are not a problem with e-cigarettes.”
Under the proposed legislation, it would still be a class B misdemeanor for anyone outside the jail to give inmates E-Cigarettes and require inmates to purchase specially designed plastic e-cigarettes only from state-sanctioned commissary, and no longer a sentence extending crime for an inmate to possess a controlled but legal substance.
The second of these two North Carolina debates is whether or not to impose their current 4.75% general state sales tax on the electronic cigarettes themselves, but doesn’t collect the federal or state excise tax on the nicotine containing e-liquid as it does on other nicotine related products. At the center of this issue is the fact that E-cigarettes do not contain or burn any tobacco. Rather, e-cigarettes use batteries to heat and vaporize a nicotine containing liquid or E-liquid. It is because of this, the U.S. Food & Drug Administration or FDA has labeled these devices as “tobacco products” which are subject to the federal excise tax. If this legislation is implemented in the 2014 summer short session, the expected revenue that it is projected to bring in by fiscal year 2016 is around $5 million a year.
Currently under consideration in several states, is legislation that would tax electronic cigarettes as traditional tobacco cigarettes, which would be much costlier for consumers. For example, North Carolina currently taxes consumers 45 cents per pack, or 12.8% of the cost of traditional cigarettes and other tobacco products like snuff, cigars and chewing tobacco. David Powers, VP of Government Relations for R.J. Reynolds a large backer of the proposed legislation state’s “many smokers are switching from tobacco cigarettes to e-cigarettes, adding “vapor devices carry less health risk because no tobacco smoke is produced.” “We don’t want to create disincentives for smokers to try it.”
Regardless of where you stand on these separate debates, the fact that in less than a decade electronic cigarettes have become one of the “big players” in shifting state and federal legislation, shows just how important electronic cigarettes are to changing the smokers market now as well as in the future.