Regarding PA's Stance on 40% Shipping Tax...

Posted by JDH on Jun 10th 2019

In case you were not aware, there have been some recent developments regarding PA’s 40% wholesale tax on vapor products. In a letter addressed to a PA shop owner, the Department of Revenue issued the following statement:

“Q: What is included in the purchase price of electronic cigarettes pursuant to Act 84 of 2016?

A:The purchase price includes the total value of the items delivered or services provided, which are traditionally referred to as “shipping and handling.” These charges are taxable even if they are separately stated on an invoice.

Q: Are shipping and/or handling charges subject to Tobacco Products Tax?

A: Yes, if the item(s) being shipped are electronic cigarettes subject to Tobacco Products Tax, the shipping and handling charges are also subject to tax. However, if the item(s) being shipped are subject to Tobacco Products Tax, but are NOT electronic cigarettes, then the tax does NOT apply to the shipping and handling charges. In the case where different mixes of products subject to the Tobacco Products Tax (or not-taxable items such as cigars) are shipped together in the same package or on the same pallet, then the shipping and handling charges for the entire shipment are subject to tax.”

Out of concern for the vaping industry in PA, we reached out to our lawyer for clarification. We received this response from our lawyer:

“My review of the statute indicates that they are within their authority to apply that rate to items that are taxable under the Act, i.e., the complete device/kits, and e-liquid. This is because the statute taxes e-cigarettes based on the “purchase price” and the definition of “purchase price” within the statute encompasses shipping and handling.”

Moving forward, we will be charging the 40% tax for shipping and handling on applicable orders. Even though this is a small step back for the Pennsylvania vape industry, we’re always searching for creative solutions and ways of diversifying which will benefit everyone dealing with these burdensome regulations. We look forward to sharing some of the ideas we’ve been working on with you all so that we can help to keep this dream alive.