Governor Nixon (D) this week vetoed a Missouri bill that would have prohibited the sale of electronic cigarettes to minors, ostensibly because he was upset that the bill didn’t include new taxes on the products. The bill, SB 841, would bar sales to individuals under 18, continue to subject electronic cigarettes to the state and local sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. , but would prohibit the products from being taxed or regulated as tobacco products in the state. That last part was the hang up for Gov. Nixon, who called the bill “cynical.”
It appears in part that the Missouri legislature was trying to avoid a mistake Minnesota made a few years ago. There, the Department of Revenue issued a ruling that lumped electronic cigarettes in with the Other Tobacco Products (OTP) category of the taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. code, subjecting the products to a 95 percent wholesale tax. SB 841 would have, in effect, ensured that the Missouri DOR could not create new taxes like this without a legislative vote.
I’ve argued in the Wall Street Journal and the Seattle Times that there’s no reason to tax electronic cigarettes above the sales tax rate, especially because the products have a risk profile that is several orders of magnitude safer than traditional incinerated tobacco.
For now, I suppose, Governor Nixon is playing politics with this one. Ironically though, in his attempt to tax these products (supposedly to discourage consumption?), he’s keeping them legal for minors. Curious.
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