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BONUS CONTENT: Regulatory Landscape Bumpy for Vaping Industry


NATIONAL REPORT — Electronic cigarettes and vaping products are still the relatively new kid on the tobacco block, but they have not escaped the watchful eye of federal, state and local lawmakers.

Take taxation. Like cigarettes and other products on the backbar, state legislators are beginning to set levies on vapor products. The good news: It's still a small amount of states — seven, plus Washington, D.C. The bad news: The levies are all over the map.

"The consistency factor of electronic cigarette taxation is kind of frustrating," Justin Wiesehan, vice president of regulatory affairs at Mistic E-Cigs, told Convenience Store News. "There are some states that we believe are doing reasonable taxation. If you look at states like North Carolina at 5 cents a milliliter, that's pretty reasonable. If you look at states like Minnesota where it is 95 percent of wholesale, and California's Prop 56, those get 'taxing.'"

In November, voters in California approved Proposition 56, which called for a $2 increase on the state's cigarette excise tax and an equivalent increase on other tobacco products, including a 27.3-percent tax on e-cigarettes and vapor products. The new rates went into effect April 1.

As a company that does business nationally, every state affects Mistic, Wiesehan explained.

The Charlotte, N.C.-based company is currently lobbying against certain taxes, but trying to come to the negotiation table with lawmakers to come up with a solution that works for everybody.

"Hopefully at some point, there may be some consistency across the country when it comes to taxation," Wiesehan said. "At the end of the day, it is going to come."

The vaping industry is also grappling with restrictions on the municipal level. One of the first moves has been to include e-cigarettes in existing indoor clean air acts, which ban smoking indoors. Flavor bans are also beginning to land on local agendas — with Oregon taking a statewide approach.

The Oregon bill, according to Wiesehan, looks to ban packaging images that depict a flavor. "So, you can't sell a bottle [of e-liquid] with a picture of a strawberry or a green apple. It's hard to market a flavor if you can't show it," he said, noting that the state is amending the bill.

Overall, though, the Mistic executive doesn't think the growing list of regulations — notably indoor clean air acts — are hurting the vaping industry. "I think people who found vaping as a way to change a habit they had for years to an alternative form don't really care if they can smoke indoors or not, because they weren't able to do that with cigarettes," said Wiesehan.

Mistic acknowledges regulations do have a place. For example, the company supports certification for batteries used in electronic cigarettes. UL, a battery certifier, published certification for e-cig batteries, and Mistic began that process for its products in the spring.

In addition to taxation and local regulations, the vaping industry is now dealing with the Food and Drug Administration's (FDA) deeming rule, which put federal regulations in place as of Aug. 8. Part of the deeming rule calls for manufacturers of newly deemed products to submit Premarket Tobacco Applications (PMTAs) for approval to market their products by Aug. 8, 2018, a process Mistic is currently going through.

Calling it "as daunting as we thought it would be," Wiesehan told CSNews the company has been busy studying patterns of use, abuse liability, impact on smoking behavior, youth initiation, and cessation — just to name a few.

"This is new for everyone and the FDA is anxious to learn. They are open to learn. Communication with them has been better than expected," he said.

From a business perspective, there are some things that keep Mistic CEO John Wiesehan up at night.

"We're on board with sensible regulation. We're on board with the need to weed out some of the bad apples, and the way to do that is through a sensible regulatory environment," he said.

In April, both Mistic executives spent four days in Washington, D.C., meeting with federal lawmakers to discuss two main concerns:

1. Moving the deeming regulation grandfather date (which stands at Feb. 15, 2007); and
2. Pushing back the deadline for PMTAs until the FDA publishes final guidance for the application process.

A bipartisan bill (the Cole-Bishop Act) that would have established the day the deeming regulation went into effect, Aug. 8, 2016, as the grandfather date for newly deemed products failed in Congress.

Look in the 2017 Convenience Store News Guide to Tobacco for more on the state of the business.

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