A big win for the vaping industry
A ruling handed down on Friday by the Commonwealth Court is a huge win for the e-cigarette industry, which is no longer required to pay a steep tax for the devices' components.
Bob Oesterling, owner of Kingdom Vapor in Oakland Township, brought the suit before the court with a claim that the state Department of Revenue misinterpreted the state Tobacco Products Tax Act language when a 40-percent tax was imposed on all components of an e-cigarette on Dec. 1, 2016.
E-cigarettes, commonly referred to as “vapes,” allow users to simulate smoking by inhaling a vapor created by special flavored liquid heated by a coil in the device.
Users can buy coils, batteries, tanks and other components for their vapes, which have been taxed 40 percent since the Department of Revenue's tax went into effect.
Oesterling said Kingdom Vapors is a wholesale operation that he and his sons, Ben and Zach Oesterling, have run since September in the former Oakland Township Elementary School.
“I think it will be a big improvement for the industry overall in Pennsylvania,” Bob Oesterling said Monday.
The Commonwealth Court judges agreed with Oesterling and his attorney, Andrew Salemme of the Lindsay Law Firm in Butler, that the Department of Revenue taxed e-cigarettes' “integral” parts when that word is not included in the language used by the state General Assembly when it created the Tobacco Products Tax Act.
The Commonwealth Court judges therefore ruled that the vape components do not fall under the 40-percent tax.
An email from the Department of Revenue's communications office said it is not yet known if the department will appeal the decision.
“The department is still in the process of reviewing the court's decision and determining next steps,” said Jeffrey Johnson, a department spokesman.
Oesterling said about 120 vape shops across the state closed after the tax was instituted in December 2016.
“From then on, the DOR declared that everything in a vape shop was taxable at 40 percent,” Oesterling said. “We were trying to get some solid statements from the DOR on what was taxable.”
He filed the suit at Commonwealth Court as soon as the tax went into effect.
“It has taken this long to get through the court system,” Oesterling said.
The Friday ruling does not cover liquid for e-cigarettes, known as “juice,” which remains subject to the 40-percent tax.
Oesterling said when the tax went into effect, many vape shops began making their own juice to avoid the 40-percent price increase on juice from wholesalers like Kingdom Vapor.
“That was a huge hit to our business and remains in effect,” Oesterling said of the high tax on e-cigarette liquid.
Still, Oesterling's business is thriving at the former school.
“Our business is growing at a fast pace,” he said.
Oesterling called vaping the best way to quit smoking, which he did after a decades-long habit of smoking two packs of cigarettes per day.
“There's a big sigh of relief in the industry,” Oesterling said of Friday's ruling.
Salemme gave a statement on Monday about the ruling. It said in part:
“This is a significant victory for small vaping businesses and vaping consumers as well. ... We at Kingdom Vapor ... are proud to have played a role in achieving this result.”
