UPDATE: Pennsylvania Vapor Tax Is Worse Than We Thought

Five years in prison?

It sounds like a bad joke, but it’s all too real. Pennsylvania vapers could go to prison for buying vapor products online and not paying a 40 percent tax on them. “The penalties for evading the tax include up to a $5,000 fine, or prison time not to exceed five years,” Alex Clark of CASAA told me in an e-mail. You read that right: you could go to jail for buying e-liquid online and not sending a check to the state of Pennsylvania.

It’s even illegal to merely possess products bought in another state. Section 1207-A(a) of the law criminalizes the ownership of any vape device or e-liquid that wasn’t bought from a licensed Pennsylvania seller. So if you buy a mod on a trip to New Jersey or Ohio, merely having it in your possession will make you a criminal after October 1. As bad as the law seemed in our original article, it keeps getting worse.

You thought you found a way to quit smoking? Sorry, pay up or possibly go to prison.

Vapers who buy online are now importers

“The bill defines consumers as “unclassified importers’,” says Clark, who has taken a thorough look at the 257-page budget bill. That means that individuals who purchase any vapor product, including e-liquid, from a vendor that hasn’t already paid the tax would be responsible to pay the state, based on retail price.

In other words, anyone purchasing online or out of state would be responsible for paying 40 percent of the amount spent to the state of Pennsylvania.

Buyers will be required to file reports and make payments monthly — just like vape shops will have to do. So not only will shops be punished with a 40 percent tax on the cost of their merchandise, so will consumers.

Online sellers outside of Pennsylvania may choose to avoid complications and refuse to sell to Pennsylvania residents. And many PA businesses may opt to relocate — or close their operations altogether.

The floor tax clarified

One of the most alarming aspects of this law is the “floor tax” it requires vendors to pay on existing stock. Not only will they have to pay 40 percent of wholesale cost on products purchased from distributors and manufacturers after the law goes into effect, they will have to pay the same amount on all existing inventory. The common understanding was that the tax would be due immediately.

The effective date of the tax, according to CASAA, is October 1, 2016. The floor tax is assessed on retailers’ onhand stock on that day. However, stores will then have 90 days to make the payment. The three-month grace period may allow some shop owners to find a way to afford it — although many may be unable to. However the tax is collected, the fact is that small businesses will be forced to hand the state cash amounting to 40 percent of the value of all merchandise in their stores, or shut their doors.

Additionally, manufacturers, distributors, and retailers must obtain licenses from the state in order to sell products in Pennsylvania. And retailers must purchase products from licensed distributors or wholesalers.

What can we do now?