NC Adopts New E-Cigarette Tax to Offset Lost Tobacco Revenue

As smoking declines among North Carolina residents, electronic cigarettes are on the rise. Just five years ago, most people in NC had no idea that ecigs existed and now you can spot them across the state at restaurants, movie theaters, parks, and malls. Even small towns like Newton have seen vaping shops emerge and draw in a crowd of smokers looking for an alternative. Tobacco has long been a profitable business for the state, but now lawmakers are seeking revenue by taxing ecigarettes to offset losses as more smokers switch to vaping.

This week, lawmakers voted to approve House Bill 1050, which includes a new excise tax on ecigs. It took less than a week for the bill to move from the Joint Revenue Laws Study Committee to approval in the chamber. Rep. Becky Carney from Mecklenburg County told reporters that she thought the bill had moved too quickly, without substantial consideration and study. “This is a huge step we’re about to take in North Carolina, and I do think that it merits debate as a standalone bill,” she said.

Carney explained that cigarettes are currently taxed at 45 cents per pack in NC, but the new bill will tax ecigs at 5 cents per milliliter of nicotine liquid. While that will offer a small boost in tax revenue, it still means an overall loss from the previous income related to tobacco taxes. “Yeah, a nickel is great for the industry, of course –that’s low. But what about those revenues in North Carolina that we potentially will lose and this could bring in”? Carney said.

Just last year, NC passed a law that prohibits the sale of ecigs to minors, essentially classifying them as tobacco products. However, the new tax bill defines them as non-tobacco products so it is in direct contradiction to last year’s bill. This creates a major discrepancy that sets the state up for further challenges in future regulation. Carney said the best choice would be to wait for the FDA to rule on ecigs rather than jumping ahead with state-issued tax bills.

Rep. Rick Glazier of Cumberland agreed. He called the bill a “rush judgment” and pointed out that lawmakers don’t know enough about ecigs at this point to make a sound decision. However, Republicans in NC argued that some tax revenue from ecigs was better than nothing at all and the rate could be adjusted at a later date once the FDA releases an official regulation for the ecig industry. Rep. Larry Pittman from Cabarrus said the bill was a positive step. “This is a place to start, and I think it’s good enough.”

Rep. Julia Howard of Davie County pointed out that ecigs should be treated carefully because the industry is bringing hundreds of jobs to NC, with 300 new jobs expected next week alone. Rep. Jim Fulghum brought a unique perspective as a physician and while he doesn’t approve of using ecigs, he said that they are less harmful than the alternative. “It ain’t perfect, but it sure beats smoking cigarettes,” he told reporters.

Do you think the new NC ecig tax is fair? Will it turn people off from vaping or is the lower tax rate enough to keep the current momentum going?

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Author Focus: Katie Bercham
Katie actually had a negative first experience of electronic cigarettes, picking up a cheap and horrible model from my local mall. Thanks to a chance meeting with co-editor David, she hasn’t had a tobacco cigarette in over 2 years. She brings a strong female voice to the e-cig community... Read Full Profile >