An electronic cigarettes store in Dandan will be increasing its prices after the Division of Customs decided to tack a 60% import tax on tobacco substitutes.
Beginning last Dec. 12, Customs began implementing the 60% import tax on e-cigarette products, shortly after determining that they are tobacco substitutes under provisions of the CNMI excise tax law, according to VaprSpot owner Louis Rodgers.
In a text message to the Saipan Tribune, Customs director Jose Mafnas confirmed the implementation of the tax.
“Yes, it’s true. Same rate as tobacco products,” he said.
Because of this, prices at VaprSpot will increase effective Jan. 1, 2020, Rodgers said. In addition, first responder discounts will temporarily end on Dec. 31, 2019, and the store’s rewards program will temporarily end on Dec. 21, 2019.
“The tax increase will certainly cause me to have to increase my prices by as much as 33%. And my options are really limited. I either increase prices or reduce my staff and their hours. Or worst case, close, and I’m not ready to do that,” he said.
For example, the store’s Hi Drip will increase in price from the current $18 to $24, its replacement coil from $4.25 to $5.45, and its Vinci 40W kit from $45 to $59.
The new tax caught Rodgers by surprise, particularly since that there was no official word from Customs about it and he had to learn about it from third party sources.
“It’s just sad considering I routinely pick up packages for the shop from the post office and stop by the Customs desk. So, it’s disappointing that they didn’t even give a courtesy heads up. [There was] no official announcement other than a piece of paper posted by the Customs desk at the post office. I have, however, confirmed it with the agents at the desk,” he said
While he agrees that Customs is just doing its job in enforcing the statute, Rodgers believes that the 60% import tax is a bit excessive.
“I have spoken at length with members of the Legislature as well as an attorney, conveyed my concerns, and the only recourse is to change the law. A 60% tax is extremely excessive and will be a significant cost increase and financial burden that I cannot carry alone without passing the increase to you, the customer.”
He urged his customers to extend their concern to their lawmakers on Capital Hill to have the law amended. “Share your story with your legislators about using an electronic cigarette or Vape. Share your concerns about limited access and higher prices. Do you think higher prices or limited access would steer you back to smoking or chewing? If that is a concern, share it.”
He, however, has found a silver lining.
“The only saving grace for my business is that all imports will be taxed. So, you as a consumer who orders online, will also be taxed at the post office by Customs. The difference is I get taxed at the wholesale rate. …Consumers who orders online and ship to Saipan, will get taxed at the retail rate,” he said.
At the end of the day, it will be cheaper for customers to buy e-cigarette products locally rather than ordering online, which is a win for local shop owners.