Boulder planning to exempt nicotine-free products from voter-approved smoking device sales tax

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 is meant to clarify an existing law passed by Boulder voters in 2019 that requires collecting the sales tax on electronic smoking devices. City officials have said in the past that “inartful drafting” of the ordinance implementing the ballot measure approved voters has led to some confusion about whether all electronic smoking devices are subject to the tax, regardless of what those devices are used to smoke.

“From my perspective as a tax administrator, the problem is we have a code that is causing confusion,” Tax and Special Projects Manager Joel Wagner said. “The language in the code that says that an electronic smoking device is something that simulates smoking of nicotine or any other substance opens that tax up to interpretation.”

City staff originally proposed a code change that would impose a tax on all electronic smoking devices, without considering what the device is being used to smoke.

But the City Council decided against doing so, at least in part because members felt it went against the original intent of the voter-approved measure.

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

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

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

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

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

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

Mayor Aaron Brockett and Councilmember Bob Yates are the only two current council members who were serving in 2019, when the ballot measure first came to be and was approved.

“It was about teen nicotine vaping. That was the focus,” Brockett said.

Yates agreed, noting the intent was to dissuade young people from vaping nicotine by increasing the cost to do so.

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

The Cannabis Licensing Advisory Board, which provided some direction 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 an option to put it to the voters but opted against it.

Members of the City Council said it felt too soon to pursue such a measure but agreed that they’d like to discuss high-potency cannabis and other related issues in the future.

The ordinance that will exempt products without nicotine or tobacco from the sales tax will come before the Council at a later date. Staff will work on scheduling at one of the weekly Council Agenda Committee meetings.

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