Vape Shop Wins Court Lawsuit

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Larry told us this morning that it wasn’t Benjamin Franklin that originally said death and taxes are certain, but the actually original quote is  ‘Tis impossible to be sure of anything but Death and Taxes,” from Christopher Bullock’s book, The Cobler of Preston.

The more you know, right?

We started off with that fact dump to not only make Larry happy but also to refer to the result of a recent court case that is a prime example of the underdog wins. Our underdog in this case is vape shop owner Joshua Sanders, of East Coast Vapor in Swatara Township, Pennsylvania.

In 2016, Sanders recalls the Department of Revenue telling him he had to pay a 40 percent tax on all his store’s inventory. However, doing so would have effectively run him out of business, with little post-tax profit and too high of a price markup for consumers.

“For someone to come into our store and tell us, ‘Hey we’re going to pretty much shut you down because we’re taxing you so much money,’ I thought that was unfair,” said Sanders in an interview on Fox 23.

The measure was enacted by the legislature as a part of the state’s budget, and even included inventory purchased before the tax was imposed. But  sudden tax hikes are nothing new to vape shop owners and tobacco sellers. These types of taxes on tobacco products were originally called ‘sin’ taxes in 1794, and they were part of a tariff specifically placed on certain goods deemed harmful to society including candies, drugs, soft drinks, fast foods, coffee, sugar, gambling and pornography.

Increasing a ‘sin’ tax has been historically more favorable than increasing other taxes due to the idea of it not hurting non-consumers of said goods and as a soft deterrent from purchasing such goods. It’s also been historically proven to not work.

In fact, studies have shown that such taxes burden the poor, the dependent, and make it feel like the government is punishing the public like a nanny state.

Also since the government collects all the taxes, it’s the legislature that really benefits from keeping people smoking. In the Fiscal Year of 2010, the federal excise tax on cigarettes (around 1.01 in 2011) brought in $15.5 billion in revenue. That’s significant money that the government profits off of smokers instead of business owners like Sanders.

“We're talking hundreds of thousands of dollars,” said Sanders.

According to the Tobacco Products Tax Act, also known as TPTA, an electronic cigarette is defined as an electronic oral device, like one composed of a heating element and battery or electronic circuit, which provides a vapor of nicotine and thus qualifies to fall under the 40% tax.

However, Sanders says only five percent of his store’s inventory meets this definition. Most vape shops don’t just sell e-cigarettes, but also refills, flavors, and other accessories that carry no nicotine. In response, he filed a suit with the Commonwealth Court to dispute the products that qualified for the tax with the definitions of the products that show they don’t actually qualify under the Act.

“We weren’t trying to make up words in the law. We just read the black and white letters and went by what it said and that’s what we thought we should pay the tax on,” said Sanders.

Luckily for Sanders, and by extension, us, the courts agreed.

As of his court case ending in June 2018, the 40 percent tax will now only be imposed on e-cigarette starter kits, not the accessories and vaping juice. Sanders is happy about his court case and we’re honestly very happy for him and this ongoing fight against the sin tax.

Court cases like this not only help small businesses thrive better, but showcase how e-cigarettes can be better for the consumer’s wallet and in turn their health.

“When we started in 2011, we gave my mom an electronic cigarette,” Sanders says. “She [used to] smoke three packs a day. She quit. So if she can do it, anyone can.”

As of now there hasn’t been any word on other businesses getting refunded for the tax money that they paid, and unfortunately a few shops have gone out of business from the tax act.

But with cases like Sanders and more awareness/ informative blogs (like us) becoming more popular to discuss and use as reference, perhaps in the near future vaping will no longer qualify as a ‘sin’ tax. But the fight will continue, that we are also certain of.