Oregon kicked off 2021 with a hefty cigarette tax increase, and the trickle-down effect is being felt by smoke shops.
Measure 108 was passed in November during the general election. The language included changes to Oregon’s tobacco laws. The one felt immediately was on January 1, when a cigarette tax increase tacked on an additional $2 per pack of 20 cigarettes.
Similarly, vape products and items that fall in what’s called an ‘inhalant delivery system’ will be slapped with a tax equalling 65% of the wholesale purchase price. Another switcheroo? Tobacco products have been recategorized into new tax brackets. Smoke shops, tobacco retailers, and vape shops will have to make concessions to the new guidelines. Some distributors have to apply for new licenses to continue selling tobacco products. Case in point: cigarillos will be taxed the same as cigarettes. Smoke shops that sell that item will face two choices, get a cigarette distributor license or purchase their stock of cigarillos from another state-licensed cigarette distributor or wholesaler.
Some smoke shops and other tobacco retailers might have to rethink the inventory they carry to mitigate non-compliance. Smoke shops that carry a diverse product offering, including apothecary, kava, kratom, incense, gifts, CBD, smoking implements, etc., won’t feel the sting as much as those that offer tobacco products primarily.
Oregon offers three types of licenses for those who want to sell tobacco products. The license is specific to a category. For example, those businesses that bring untaxed cigarettes into the state for resale (i.e., distribution) need a Cigarette Distributor License. This allows the individual or business to buy Oregon tax stamps for the products from the state. Businesses that buy stamped cigarettes from licensed distributors need a Cigarette Wholesaler License. Finally, businesses that bring untaxed tobacco products into Oregon for resale must have a Tobacco Products Distributor License.
Unsurprisingly, once Measure 108 passed, the Department of Revenue has received a record number of applications for the various license types. Applying for any of the three types of tobacco licenses takes approximately 4-6 weeks per the Oregon.gov website.
