A little over 3 years ago Indiana passed a bill that put eLiquids

April 08, 2019

production into the hands of a small minority of business owners.  Certain lobbyists with loyalty to those who are more than dubious pushed this legislation to protect very large businesses from the competition of vape shops and smaller manufacturers.

It took less than two years for the courts to find the monopoly protections of House Bill 1432 unconstitutional, but not before it shut down 27 in-state manufacturers and more than 125 small business retailers. This boneheaded mistake cost the state hundreds of small business owners and their employees jobs, as well as millions of dollars in now missed tax revenue.

The situation was rectified during the 2017 session by those who may not have been aware of the consequences of giving so few businesses control of an industry that is helping adult smokers finally quit the deadly habit. The effort to reasonably regulate the eLiquid industry could come to an end if the legislature passes House Bill 1444 this year.

This particular bill would impose a new tax on the volume of eLiquid used in vaping products. This would disproportionately raise the cost of most products sold by small businesses while giving a great strategic advantage to non refillable pod system products, particularly Juul Labs, the now largest e-cigarette company in America. Unless you've been living under a rock you know their pod products contain high volumes of nicotine but a low volume of eLiquid overall.

One Juul pod contains less than one milliliter of liquid, making the effect of a tax on liquids incredibly small for them. By comparison brick and mortar vape shops primarily sell liquids in bottles that are often sixty times the size of a Juul pod with nicotine levels that are typically at least 10 times lower.

Despite being much larger and delivering adults a lower dose of nicotine than Juul pods, most small business vape shops products are about the same cost, if not much cheaper, for adults looking to make the switch away from smoking.

That's the problem with the structure of this proposed tax. If it passes, Juul will bear about 1% of the tax burden despite representing about 30% of the overall market. Under this bill, a typical pack of Juul pods costing $16 will be taxed at less than 12 cents. The on average 60 milliliter bottles sold in vape shops would be hit with a comparative tax of $2.40.

Indiana manufacturers could simply respond to this tax by offering their products in smaller, prefilled, or refillable pods. However such a modification would be illegal, because the FDA deeming law not permitting modifications to existing products. While Juul has a product on the market that shields them from the impact of this tax, Indiana manufacturers can't produce something similar to mitigate its impact.

Simply put, Indiana shouldn't structure its tax code to permit advantages for California billionaire tech investors, especially when doing so will come at great cost to actual Indiana businesses.  What do you think about this tax? What should Indianans do?

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