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Lawsuit Filed By Companies Against New E-Cig Laws

The e-cigarette tax law in Pennsylvania is about to get challenged by a company that is refusing to accept the new legislation, and it’s based right in Clarion, Pennsylvania.

CPBJ, the state’s premier business journal, reported earlier this week that the Oesterling family, which owns Kingdom Vapor Inc. and Smoke 4 Less LLC filed a petition in Commonwealth Court. The family is seeking a declaratory judgment against the state’s Department of Revenue over the recently passed legislation known as Tobacco Products Act.

Readers might remember the Tobacco Products Act as the legislation that allows the state of Pennsylvania to tax all e-cigarette products, including accessories, at 40 percent, with the first installment from e-cigarette shops and companies due at the end of this year.

Most in the industry feel that the taxation of products that are not e-liquids or e-cigarette mods is a mad grab by the state to bring in more revenue. By taxing everything from batteries to cotton found in the coils in the mods and taxing the companies directly instead of the consumers, the state is essentially placing an arbitrary barrier to the industry. That makes it difficult for businesses to stay current on their taxes.

To date, over 70 e-cigarette shops and companies have closed. An estimated 90 percent of all shops and businesses are expected to close by the middle of next year. The result will be that the state will not receive a fraction of the revenue they believe they will make with this tax, a trend this publication has seen in other states that have tried to install similar tax laws.

The Oesterling family has decided to fit back, however. It does not dispute that e-cigarette mods and liquids should be taxed but it does challenge the idea that accessories should be taxed as well. The family is hoping for a hearing on this particular issue.

The Department of Revenue has not yet responded to the petition; however, the department has released a statement that reads, in part, that:

“The department has not seen the complaint and it is our longstanding policy not to discuss the specifics of pending litigation. Under the Tobacco Products tax enacted last summer to fund the bipartisan budget, tax was imposed on e-cigarettes which are defined under the statute as an electronic oral device, including ones composed of heating elements, batteries or electronic circuits used to inhale vapor to simulate smoking, including liquid or substances sold for use in e-cigarettes.”

The Commonwealth Court’s Chief Clerk’s office has said that no hearings are currently scheduled for this lawsuit. If the Department of Revenue does not respond, it will still be possible for the Oesterling family to request a hearing on this issue.

This publication will continue to keep you updated on this lawsuit as it unfolds.

Electronic Cigarettes • April 5, 2017

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