When the debate over electronic cigarettes and vapor products started months ago in Indiana, the Attorney General presented a misguided idea aimed at raising the cost of these innovative products. He suggested e-cigarettes be subjected to the same rate of taxation as smokeless tobacco and other tobacco products. They are currently subjected to the sales tax. As we noted at the time, this would have created an incentive for people to continue smoking traditional tobacco cigarettes instead of making the switch to a much healthier alternative.
The tax debate seems to have stalled but a more nefarious proposal has taken its place. Senate Bill 539 and its companion House Bill 1432 have both passed their respective chambers of the Indiana legislature. Americans for Tax Reform opposes these bills and recently sent a letter to Indiana lawmakers and Governor Mike Pence explaining why.
These pieces of legislation create a state-based regulatory framework for vapor product packaging and labeling, a framework that is best left to the Food and Drug Administration (FDA). If every state imposed its own set of guidelines for good manufacturing practices, labeling, and packaging, companies who sold products in multiple states would have a compliance nightmare on their hands, likely reducing the availability of products on the market.
Additionally, the FDA is better suited than the state to regulate and test ingredients and batches of products in this industry.
There is a more sinister motive behind the push to regulate these products that has nothing to do with protecting consumer or the general public. These regulations are being pushed by a company intent on establishing a monopoly on vapor product sales in Indiana.
The Indiana Vapor Company LLC would be set up to be the sole manufacturer of e-liquid (the product consumers use to refill their “open system” vapor products) in Indiana. Small businesses in the state could not afford the expensive security systems SB 539 and HB 1432 mandates, security systems far more complex than ones required by the federal government for tobacco companies. Indiana Vapor Company has suspicious ties to a Centaur Gaming, a company that is no stranger to the benefits of a monopoly on the market.
We urge the legislature to reject this blatant act of crony capitalism and defer to the FDA for the appropriate set of guidelines for vapor products. Any set of state-based regulations should acknowledge that when the FDA releases their minimum level of product guidelines, they will trump state laws to ensure simplicity and conformity for all companies who do business in multiple states. This will benefit consumers, who seek a wide range of available flavors and options in the vapor market in their journey to quit smoking.