With Excise Tax Tripling From July, Louisiana’s Vaping Industry Faces a Survival Crisis

Reports indicate that in Louisiana, newly implemented regulations and tax adjustments are increasing pressure on local vape businesses. On June 15, 2023, the Governor of Louisiana signed a bill raising the consumption tax on electronic cigarette liquid from 5 cents to 15 cents per milliliter, effective July 1.
According to reports, the new tax law is expected to generate an additional $9.8 million in tax revenue for the Louisiana government. However, for small vape businesses, this means they may face higher operating costs, leading to product supply constraints. After reviewing feedback from respondents in related reports, the following specific impacts on the vaping industry have been identified:
1. Reduced product inventory: Due to the tax increase, some vape shops have already reduced their inventory levels. The increased tax burden has made businesses more cautious in managing inventory to minimize potential economic losses.
2. Price increases: To offset the increased consumption tax, many shops have had to raise their product prices, which may further decrease consumer purchasing willingness.
3. Declining sales: Due to higher prices and reduced product choices, some vape shops have begun to see a decline in sales.
4. Increased survival pressure on businesses: Higher taxes and stricter regulations have led to increased operating costs for small vape businesses, putting some shops at significant risk of survival.
5. Interstate trade: Due to neighboring states like Texas, Arkansas, and Mississippi not imposing consumption taxes on electronic cigarettes and vaping products, some consumers may turn to these states to purchase vape products, further impacting Louisiana's vaping market.
In addition to tax issues, new regulations require vape shops to submit detailed product ingredients and production processes to the FDA. For small vape shops, this process could cost between $100,000 to $500,000 per product. This poses a significant economic burden on businesses in the future.
Regarding the increase in electronic cigarette consumption tax rates in Louisiana, the Vapor Union previously shared insights in a tweet titled "Tax Rates Triple, 60% of Products Shelved, New Law in Louisiana Triggers Industry Shock" just before the new tax rate took effect on June 29. It mentioned that Paul Hollis, who proposed this bill, revealed that Altria and Reynolds Tobacco participated in the negotiations for this state law, believing that Louisiana's allowance for retailers to order electronic cigarettes directly from manufacturers led to tax revenue loss.
Based on the details provided by the congressman who proposed this bill and the current competitive landscape of the U.S. electronic cigarette market, it cannot be ruled out that Altria and Reynolds Tobacco's lobbying played a role in this development. After all, once this law takes effect, Altria's NJOY and Reynolds Tobacco's VUSE will be among the few brands that can continue selling electronic cigarettes.