An Oregon Ban on Grocery Taxes Could Hamstring Local Control of E-Cigarettes

Vaping and e-cigarettes are increasingly popular with young consumers.

Vaping and e-cigarettes are increasingly popular with young consumers. (Abby Gordon)

One of the debates raging around Measure 103, which would ban taxes on groceries, is what the measure would mean for e-cigarettes.

Unlike conventional cigarettes, e-cigarettes are not taxed in Oregon. But given the large and rapidly growing market they command—and concerns on the part of public health officials about their popularity among teens—that tax-free treatment is unlikely to last. So called "sin taxes"—on tobacco, alcohol, marijuana and gambling—are a crucial source of revenue for the state and for local governments. It's not a matter of if, but when, such taxes will cover e-cigarettes as well.

Unless, that is, critics of Measure 103 are correct in their assertion that the measure's sweeping language would make e-cigarette taxes unconstitutional.

"We would certainly like to be able to tax them," says state Rep. Barbara Smith Warner (D-Portland), a member of the House Revenue Committee. "You tax to discourage consumption, especially among young people, who are very sensitive to price. But e-cigarettes and vaping supplies are not listed in the exemptions to Measure 103, so the manufacturers will say they cannot be taxed."

Measure 103 would amend the Oregon Constitution to ban taxes on "groceries," but what that term includes has been the subject of debate. The measure grants exceptions for tobacco products, but opponents say the measure would ban potential future taxes on e-cigarettes and vaping products.

That's because these "inhalant delivery systems" contain nicotine but do not contain tobacco.

Adding to the ambiguity, nicotine derived from tobacco is sometimes considered a tobacco product. This means vaping products that do not contain tobacco but contain nicotine derived from it might be included in Measure 103's exemption for tobacco products. But if the products contain synthetic nicotine or nicotine derived from other plants? Multnomah County couldn't tax them.

Related: Measure 103 will ban taxes on groceries. What else will it do?

In a Sept. 20 memo on Measure 103, assistant Multnomah County attorney Will Glasson wrote, "Operational impacts would also extend to the county's ability to regulate the sale of particular 'grocery' items for public health concerns," including nicotine vaping items.

A ban on e-cigarette taxes would arrive just as vaping is gaining traction in high schools—and raising alarm among public health officials nationwide.

"When a nicotine product is sweet and cheap, young people buy it," says Dr. Jennifer Vines, a deputy Multnomah County health officer. "From a public health standpoint, we now have two battlefronts. We hope we're not witnessing the next wave" of nicotine addiction.

Multnomah County banned the sale of inhalant delivery systems to minors in March 2015. Two years later, Gov. Kate Brown signed a law banning the sale of tobacco products and inhalant delivery systems to persons under 21.

Yet neither the state nor Multnomah County have taxed e-cigarettes and vaping products like Juuls, despite widespread concern over their safety and popularity with teens and young adults.

Multnomah County Chairwoman Deborah Kafoury said in May 2015 that the board would consider taxing e-cigarettes. Kafoury said the county would first wait to see what action the state Legislature would take that session. In the more than three years since, no tax has been levied—by the state or county.

The county board is still considering taxing e-cigarettes, but there has been confusion whether existing state taxes on cigarettes prevent the county from levying additional taxes.

In Oregon, tobacco taxes are pre-empted at the state level, meaning counties cannot levy additional taxes on cigarettes, according to the county. Whether that pre-emption applies to e-cigarettes and vaping products is subject to debate.

County Commissioner Sharon Meieran says county officials are still waiting on state lawmakers to act.

"I hope the state will begin taxing e-cigarettes and vaping products," she says. "Even if it would be legal to tax e-cigarettes at a local level, tobacco taxes work most effectively if they apply statewide, and that is where this policy makes the most sense.  If the state fails to adopt such a tax, I would want to fully explore our options to do so here at the county."

In the 2017 regular session, six proposed House bills would have taxed e-cigarettes and vaping products. None passed.

One of the 2017 bills was House Bill 3467. Rep. Julie Parrish (R-West Linn) was a chief sponsor of the bill, which would have taxed e-cigarettes and used the revenue to fund mental health and substance abuse programs. (It was part of a bevy of provisions that were unpalatable to Democrats.)

Now, Parrish supports Measure 103. If it passes, Parrish says any subsequent proposal for an e-cigarette tax would prompt the courts to look at what voters intended when they passed the measure and conclude that e-cigarettes and vaping products are not tax-exempt.

"I am still firmly in support of passing a vaping tax," Parrish says. Measure 103 "is aimed to ban taxes on food we need for nutrition and sustenance. The expectation when voters read [Measure 103] is that tobacco products are not food."

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