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Online retailer noncompliance to e-cigarette excise tax and tobacco licensing laws
  1. Tomas Mejorado1,
  2. Shannon Ellis2,
  3. Raquel M Harati1,
  4. Nora Satybaldiyeva1,
  5. Gustavo Benitez3,
  6. Emily A C Austin1,
  7. Eric C Leas1
  1. 1Herbert Wertheim School of Public Health and Human Longevity Science, University of California San Diego, La Jolla, California, USA
  2. 2Department of Cognitive Science, University of California San Diego, La Jolla, California, USA
  3. 3California State University San Marcos, San Marcos, California, USA
  1. Correspondence to Dr Eric C Leas; ecleas{at}ucsd.edu

Abstract

Introduction Tax non-compliance by online vaping retailers undermines excise taxes designed to reduce vaping rates and fund prevention efforts. Despite California’s 12.5% Electronic Cigarette Excise Tax and federal mandates under the Prevent All Cigarette Trafficking Act, online vaping retailers’ adherence to excise taxes remains unclear. This study assessed excise tax compliance among online vaping retailers shipping products to California consumers.

Methods 156 purchase attempts were made from n=78 online vaping retailers shipping to San Diego residential addresses. 16 buyers used their personal billing information and residential addresses. Receipts obtained from their purchases were analysed to determine if retailers charged the required 12.5% tax. Retailer licensing status was verified by comparing retailer information to the state’s licensed business list using geolocation and approximate string matching. Differences in compliance rates were compared using χ2 and Fisher’s exact tests.

Results Of the n=58 retailers with receipts, 84.5% did not charge the required excise tax. In-state retailers were more likely to be (p<0.001) licensed than out-of-state (4.0%) or international (0.0%), but tax compliance rates did not significantly differ by retailer location (p=0.57)—intrastate (19.2%), interstate (16.7%) or international (0.0%). Licensed retailers had higher tax compliance (27.3%) than unlicensed ones (9.1%); however, overall compliance was low.

Discussion Many online vape retailers fail to comply with California’s excise tax and licensing laws. Low compliance rates indicate existing enforcement mechanisms are not optimised for online sales. Enhancing oversight and enforcement of excise tax laws for online retailers is crucial to reduce tax non-compliance, prevent revenue loss and support public health.

  • Taxation
  • Public policy
  • Non-cigarette tobacco products
  • Electronic nicotine delivery devices

https://doi.org/10.1136/tc-2024-059161

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    Footnotes

    • Contributors ECL had full access to all of the data in the study and takes responsibility for the integrity of the data and the accuracy of the data analysis. Concept and design: TM, SE and ECL. Acquisition, analysis or interpretation of data: all authors. Drafting of the manuscript: all authors. Critical revision of the manuscript for important intellectual content: all authors. Statistical analysis: SE, TM and ECL. Obtained funding: ECL. Administrative, technical or material support: SE and ECL. Supervision: ECL.

    • Funding The work is funded by grants T32IP4684 and T34IR7999 from the Tobacco Related Disease Research Program.

    • Competing interests No, there are no competing interests.

    • Provenance and peer review Not commissioned; externally peer reviewed.

    • Supplemental material This content has been supplied by the author(s). It has not been vetted by BMJ Publishing Group Limited (BMJ) and may not have been peer-reviewed. Any opinions or recommendations discussed are solely those of the author(s) and are not endorsed by BMJ. BMJ disclaims all liability and responsibility arising from any reliance placed on the content. Where the content includes any translated material, BMJ does not warrant the accuracy and reliability of the translations (including but not limited to local regulations, clinical guidelines, terminology, drug names and drug dosages), and is not responsible for any error and/or omissions arising from translation and adaptation or otherwise.