Tax forcing vape shops up in smoke
Shop owner William Smith Jr. is shown with his associate Allisia Richter at the counter of Dubtown Vapes on Henderson Avenue in Washington. The shop has been open at this location for nearly two years.
Shop owner William Smith Jr. is shown with his associate Allisia Richter at the counter of Dubtown Vapes on Henderson Avenue in Washington. The shop has been open at this location for nearly two years.
William Smith – Sr. and Jr. – have seen one of their stores go up in smoke.
“We had to be one of the fastest-growing vape shop businesses in Pennsylvania,” William Smith Jr. said Monday. “We started with $20,000 and one shop and within a year and a half, we had three. Now, we’ve lost one already.”
Father and son own Dubtown Vapes, which they launched May 4, 2015, on Henderson Avenue in Chartiers Township. Eight months later, they opened a satellite store in Waynesburg, then another in Heidelberg a few months after that. The third one wasn’t a charm – the two men shuttered it after two weeks of operation.
William Smith Jr. blames that on a 40 percent Pennsylvania tax on e-cigarette inventory that took effect Oct. 1 – and so do a number of peers. More than 100 vape shops have shut down statewide since the levy on vaping equipment and supplies kicked in, Charles Huff, president of the Pennsylvania Vape Association, said on the organization’s Facebook page. It is a Harrisburg-based nonprofit that endorses the industry as a “viable alternative to traditional tobacco use.”
PVA Vice President John Dietz added: “This 40 percent tax is a cancer. It needs a second opinion, and it needed it yesterday.”
Until Oct. 1, the Smiths were pleased with the multi-shop operation. “We were doing great until then,” the son said. The wholesale tax has curbed their enthusiasm since, causing them to compensate by raising the cost of merchandise – which, in turn, curbs the enthusiasm of the public to buy.
“We’re now down to one and a half (shops),” he said, referring to the Waynesburg location as the “half.” Smith said that store has less stock than the one off Jefferson (Route 18) and has “struggled,” although he and his dad are hopeful of building up the inventory there.
Smith Sr. runs the Jefferson shop, his son the Waynesburg store, by themselves, which helps the bottom line.
“I have no overhead. I don’t have to pay employees,” Smith Jr. said. “The only reason I make it here is I don’t pay employees. The shops that do are the ones that are likely to shut down.
“But in no way, shape or form am I living the dream life. I struggle every day to survive here. Thankfully, customers have been loyal.”
For now, they are striving to keep both shops operating. “There’s no vision of a third store anytime soon,” he said.
The Smiths aren’t the only vape shop owners in the region upset by this levy, which was part of last year’s state budget. Kathy Heinz launched Hey Juicy in Belle Vernon three years ago and would like to open other locations, but not in the foreseeable future. And certainly not in Pennsylvania. It’s all about the tax.
“This is detrimental to the vape industry,” she said. “It is shutting businesses, ones that are helping people get off cigarettes. If it doesn’t shut mine down, I’ll be surprised. And I’ve worked hard to build this up.
“(Forty percent) is a huge amount of money to pay in tax.”
Heinz likewise would like to expand, but envisions that happening only outside the Keystone State.
“I was born and raised here. I know everyone here and they know me,” she said. “I want to keep my store in Belle Vernon and plan to open more. But if I have to move to another state, I’ll do it. I cannot open another shop in Pennsylvania.”
Kirk Amodio, owner of Amodio’s Vapore in Houston, said he was a tobacco smoker until he was introduced to e-cigarettes while on vacation years ago. He said the vape option is much “healthier,” but the 40 percent tax is high and is unfairly targeting well-intentioned customers and vape merchants.
“It seems like people who want to be healthier are being punished, and vape shops are being punished also,” said Amodio, who opened his shop more than three years ago.”
The tax is taxing his patience. For one thing, it has to be paid upfront. “I pay for a $1,000 order plus $400 at the time of that order and get reimbursed later.” For another, he initially had to pay 40 percent on his inventory as of Oct. 1, which included numerous items he purchased beforehand.
“This is an attack on our industry, not just our business,” he said.
There is hope for vape shop owners and their paying customers, however. State Sen. Camera Bartolotta, R-Carroll Township, intends to introduce a bill that would replace the 40 percent tax with a 5 cents per milliliter retail tax on e-liquid.
Bartolotta said in a prepared statement: “When lawmakers have to resort to any kind of tax increase on a particular industry, it is critical to make sure that tax rate is sustainable and makes sense in the current economic climate. Failing to do that will only result in bigger problems down the road. As more shop owners continue to go out of business as a result of this tax, it becomes even less likely that the state will collect the amount of revenues projected for the current year’s budget.”
That 5 cents per mL proposal is parallel to, but lower than West Virginia’s rate of 7.5 cents per mL on e-liquids. William Smith Jr. and Heinz wholly support Bartolotta’s plan.
“That would be awesome,” Smith said. “It would be a lot more reasonable. Forty percent is ridiculous.”
Heinz, who admitted she was marginally aware of the senator’s proposal, perked up after hearing the details.
“That would be absolutely amazing,” she said. “My heart says that would save the industry.”