North Carolina Lawmakers Adopt Tax On Electronic Cigarettes

[May 30, 2014]  By Marti Maguire
 
 RALEIGH N.C. (Reuters) - North Carolina, the top U.S. tobacco-producing state, will levy a modest tax on increasingly popular electronic cigarettes as part of legislation adopted by state lawmakers and signed by the governor on Thursday.

Republican Governor Pat McCrory signed a measure that adds a tax of 5 cents to each milliliter of the nicotine liquid that e-cigarettes use. Smokers inhale through a battery-powered metal tube, turning the liquid to vapor.

The tax was cleared by the state Senate and House in bipartisan votes earlier on Thursday.

Sales of e-cigarettes have grown dramatically and are expected to surpass traditional cigarette sales within a decade, yet they remain largely unregulated. Several states have considered taxing them at a rate much higher than 5 cents, on a level that is similar to traditional cigarettes. So far, only Minnesota has adopted such a tax.

North Carolina taxes traditional cigarettes at 45 cents per pack.

Large tobacco companies including Reynolds American Inc, which is based in Winston-Salem, North Carolina, supported the 5-cent tax as they seek to replace the declining market for traditional cigarettes.

The measure's supporters highlighted what they claimed are the health benefits of e-cigarettes.

“Tobacco and vapor products have vastly differing health impacts, manufacturing processes and business models,” Representative Ruth Samuelson, a sponsor of the bill, said in an email on Thursday. “In light of this, we must ... draw a clear distinction between how North Carolina treats tobacco products and vapor products.”

Opposition to the tax has come from both Democrats and Republicans.

Some Democrats argued that e-cigarettes should be taxed at a higher rate, or that the state should wait to decide how to tax them until the U.S. Food and Drug Administration unveils regulations on e-cigarettes that are expected this summer.

Others said there should be no tax at all on a product that has been touted as a less harmful alternative to regular cigarettes.

“It makes little sense in this fragile economy to impose higher taxes on a product that provides consumers a viable and harmless alternative to traditional tobacco products,” Grover Norquist, president of Americans for Tax Reform, wrote in a letter to state legislators.

(Editing by Colleen Jenkins and Matthew Lewis)

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