Attention California, Prop 56 is here. People in CA knew it was coming, we knew it was just a matter of time, but our day of reckoning is officially upon us. So, what does it mean for vapers? What does it mean if you like Trabuco? It all depends on who you are.
Prop 56 is a complicated tax for the average person (myself included), but basically it increased the tax on cigarettes by $2 (for a total of $2.87 a pack) and applied an equivalent tax on other tobacco products (OTP) including electronic cigarettes that contain nicotine. The $2 tax is collected per pack for cigarettes whereas other tobacco products (OTP) is based on the wholesale price (roll your own tobacco, pipe tobacco, cigars, and vape). The tax on other tobacco products (OTP) will be done in two steps, the first was on April 1st and the second will be on July 1st.
Totally makes sense now, right?
Starting April 1st 2017, a 27.3% “Wholesale” tax was applied to all sales in CA. That means, a business or company will be responsible to pay this tax to the State once a month. (There’s quite a few variables and different scenarios in which this tax can and will be applied, so we will spare the technicalities and details and focus on what that means to business’s and customers in CA.)
First, in our situation, Trabuco is responsible to pay the tax for all sales within CA. So, if you buy from our webpage and live in CA, we pay the state a 27.3% tax on the wholesale cost and if we sell to a retail shop in CA, we are responsible for paying the same tax. Until July 1st when the tax will be increased from the current 27.3% to 60%? 65%? That’s still TBD.
Only time can tell how or if this will affect retail pricing for consumer’s industry wide, but we will not be changing any pricing on the retail end, in fact, we might even lower our prices for consumers. It’s to be expected an increase of $2 per pack will be a serious hit to the average cigarette smokers, and that may be the last push they need to make the switch to vaping, and our flavors were created with them in mind. As a company, we can and will absorb this tax so long as we can. Maybe not forever, but for today and tomorrow, that is our plan.
Now this isn’t in any way meant to be condescending to the other companies or shops that are increasing their prices. The tobacco classification and tax in CA has many far-ranging effects for vapor companies and will vary greatly depending on what they do. If a company had to register as a manufacturer, and a distributor, and wholesaler, AND retailer, then their cost is going to be higher than ours. Maybe they already offered better pricing than we did, so their margins were so tight that the additional tax is unsustainable. Whatever it is and whatever happens, we want Prop 56 to serve as a reminder that the vaping industry is under serious attack on the state and federal level.
If you feel so inclined, here’s a couple links so you can get involved: