Boulder plans to exempt nicotine-free products from sales tax on voter-approved smoking devices


Boulder is preparing an ordinance that would exempt products that do not contain nicotine or tobacco from the city’s 40% sales tax on electronic smoking devices.

The effort aims to clarify an existing law passed by Boulder voters in 2019 that requires the collection of sales tax on electronic smoking devices. City officials have said in the past that the “unsophisticated drafting” of the ordinance implementing the voter-approved ballot measure has led to some confusion about whether all electronic smoking devices are subject to the tax, regardless of what these devices are used for smoking.

“From my perspective as a tax administrator, the problem is that we have a confusing code,” said Joel Wagner, tax and special projects manager. “The language of the code that says an electronic smoking device is something that simulates the smoke of nicotine or any other substance opens up this tax to interpretation.”

City staff initially proposed a code change that would impose a tax on all electronic smoking devices, regardless of what device is used for smoking.

But the city council decided against it, at least in part because members felt it went against the original intent of the voter-approved measure.

“Council direction last summer was to consider an industry exemption or other exemption that clarifies this tax,” he added.

According to a staff memo from Tuesday’s meeting, if the scenario supported by the Board is approved, any refillable or reusable device, regardless of its intended use, and all e-liquids containing THC — the primary psychoactive compound in cannabis — or CBD would be exempt from the tax.

However, any device that comes pre-loaded with nicotine and any pods or e-liquids containing nicotine would be subject to the additional 40% tax.

City council members on Tuesday chose the option, saying it provides the most clarity for customers and is the easiest for staff to administer. According to information from city staff, the idea has also been supported by those in the cannabis industry as well as those working in public health.

It also maintains the original intent of the measure approved by voters in 2019.

“As a voter, when I read the language of the ballot, I also felt like it was trying to target, in particular, nicotine,” council member Lauren Folkerts said. “I really, strongly support rules that are easier to understand and implement.”

Mayor Aaron Brockett and Councilman Bob Yates are the only two current council members who were serving in 2019, when the ballot measure emerged and was approved.

“It was about vaping nicotine in teenagers. That was the goal,” Brockett said.

Yates agreed, noting that the intention was to deter young people from vaping nicotine by increasing the cost to do so.

“If we can make it more expensive for the kids, they might think twice about doing this behavior,” he said, explaining the former Council’s thinking at the time.

The Cannabis Licensing Advisory Council, which provided guidance at the request of the former city council, suggested a potential ballot measure that would clarify which electronic smoking devices should be taxed. The Council had the option of submitting it to voters, but chose not to.

City council members said it was too early to pursue such a measure, but agreed they would like to discuss high-potency cannabis and other related issues in the future.

The ordinance that will exempt nicotine- and tobacco-free products from sales tax will be presented to the Board at a later date. Staff will work on planning at one of the weekly Board Agenda Committee meetings.


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