Bryan Haynes of the Troutman Pepper Tobacco Team was quoted in a recent Vapor Voice article on a proposed new nicotine tax that has been proposed in Congress.

Currently proposed as part of the so-called “Build Back Better” legislation, the bill would impose a new federal excise tax on “taxable nicotine.”  The bill would primarily impact the vaping industry and its consumers by taxing nicotine used in e-liquids on par with cigarettes and at higher rates than other tobacco products, such as cigars and pipe tobacco.  A prior version of the bill would have also raised federal excise tax rates for all tobacco products, but that proposal seems to have been abandoned, at least for now.

In the article, Haynes noted that the proposed tax will “have a negative impact on tobacco harm reduction efforts and public health.”  Haynes also noted the unprecedented nature of the proposed tax, in that it would be the first time a tobacco tax is imposed on a raw ingredient – nicotine – instead of the finished product.  Haynes stated that “[t]his is an unprecedented type of tax that will ultimately drive former smokers back to combustible products.” 

Haynes indicated that the unique nature of the proposed tax poses challenges from a licensing perspective.  For example, companies manufacturing e-liquids purely for export would likely need to obtain a federal Alcohol and Tobacco Tax and Trade Bureau (TTB) license.  Companies that import e-liquids would also likely need to obtain a TTB license.  Haynes noted that “[t]here is the potential for a lot of unforeseen issues to arise the way the tax is currently being proposed.”

The tax currently appears unlikely to pass, mainly because it is contrary to “Build Back Better” proponents’ oft-repeated claim that the legislation would not raise taxes for those making less than $400,000 per year. 

Stay tuned to our blog for further developments on this legislation.