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Posted On December 22, 2016 By In Headline News, Market & Industry With 1263 Views

Vaping Wholesaler Sues State

Bob Oesterling opened his tobacco store, Smoke 4 Less, in Clarion in 2010.

By Paula Reed | December 22nd, 2016

Two years later, he started selling vaping products and opened a vaping wholesaler in 2013.

In that time, he says, he has had hundreds of customers quit using tobacco and start vaping.

And now, with the implementation of Pennsylvania’s Tobacco Products Act scheduled to take effect Dec. 30, he fears his entire business will go under.

The act puts a 40 percent tax on e-cigarettes, the liquid used inside them, as well as the many products associated with vaping, such as cotton, batteries, chargers, wire and coils.

Those products — which customers could buy tax-free at a regular retail store — make up about 50 percent of Mr. Oesterling’s sales.

On Tuesday, Mr. Oesterling filed a petition with the Commonwealth Court against the state Department of Revenue, seeking a declaratory judgment that the tax applies only to the e-cigarette and the liquid used with it.

A spokeswoman for the Department of Revenue said she needed additional time for research and could not yet comment.

The act defines electronic cigarettes as the devices used for inhalation, as well as the liquid placed inside them. It does not name individual components.

Because of that, the petition alleges that the attempt to tax those items by the executive branch is an improper effort to expand the legislative definition and a violation of the doctrine of separation of powers. Further, it claims that it is a violation of the uniformity clause requiring taxes to be uniform upon the same class of subjects, as well as equal protection and due process.

“The whole vaping industry is up in arms over this,” said Andrew Salemme, Mr. Oesterling’s attorney.

More than 70 vaping stores have closed since the first part of the act went into effect Oct. 1, he said. Seventeen of those, Mr. Oesterling said, were customers of his wholesale business.

“Everybody is going to online sales instead of brick and mortar stores that employ people,” he said.

In addition to the 40 percent tax on the wholesaler, the Tobacco Products Act requires that retailers pay a 40 percent tax on the inventory they keep on the floor of their stores.

Mr. Oesterling said he believes the state implemented the huge tax on the vaping industry because the number of smokers has decreased substantially since vaping began to take hold.

A lower number of smokers means less money the state gets from the Tobacco Master Settlement Agreement.

“They’re trying to tax us out of business,” Mr. Oesterling said. “The vaping industry has reduced those numbers of smokers drastically.”

In November, the Allegheny County Board of Health approved a prohibition on the use of e-cigarettes in workplaces, schools, government buildings, sports stadiums and public indoor spaces.

Mr. Oesterling said vaping is a healthier alternative to conventional cigarettes — citing an April report by the Royal College of Physicians and other information from Public Health England.

“But the FDA is trying to persuade the public otherwise,” he said.

Mr. Oesterling smoked two packs of Marlboros a day for 35 years, he said. Two years ago he decided to give vaping a try.

He said he has never felt better.

“I can smell. I can taste my food again,” Mr. Oesterling said.

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