Boulder Considering Heavy Tax on Marijuana Vaporizers

In 2019, Boulder voters passed a ballot initiative imposing a 40 percent tax on nicotine and tobacco electronic smoking devices (ESDs) to curb a spike in youth nicotine use and vaping. However, that tax may expand to include cannabis electronic vaporizers in the coming weeks.

The ordinance's ambiguous language has the city scrambling for clarification after considering the possibility of ESDs designed specifically for cannabis or other substances being compatible with nicotine pods, vape oil or loose leaf tobacco. During a Boulder City Council meeting on June 15, city officials and industry representatives weighed in on the measure's loophole.

“We believe that what is being taxed to include all ESDs is consistent with the [ordinance’s] original intent,” Boulder senior counsel Kathy Haddock said during the meeting.

The original measure defines ESDs as “any product containing or delivering nicotine intended for human consumption that can be used by an individual to simulate smoking in the delivery of nicotine or any other substance, even if marketed as nicotine-free, through inhalation from the product."

The ordinance's fuzzy wording raises ulterior threats to the city's effort at curbing vaping and nicotine use among youth, according to Haddock and Joel Wagner, the city tax specialist.

"The underlying language is what seems to be the issue," Haddock said during the meeting. "The argument has now become: does the 'any other substance' mean any other tobacco substance? Or any other substance [in general]? Our understanding is that it was intended to be any other substance [in general]."

A survey of Boulder County students found that vaping among middle and high school students was significantly higher in Boulder compared to state and national averages in 2018. Those findings were met with public outcry and a Boulder County lawsuit against JUUL for promoting products to teens. In 2019, the same year mysterious vaping illnesses swept through the country, voters approved a ban on tobacco sales for anyone under 21 and prohibited all flavored tobacco products, in addition to the tax hike on ESDs.

The language from the measure imposed the tax on tobacco retailers specifically, but vaping devices for other substances, including cannabis oil, can be found at retailers such as convenience stores and marijuana dispensaries. To close the loophole, the city council is considering an amendment to include all ESD retailers, including dispensaries, to meet the city’s new tax goals.

The amendment to include cannabis ESDs argues that some products made specifically for marijuana consumption can still be used to smoke nicotine or tobacco products. “This [amendment] is to make the code clear. We have been very lax on enforcement until council decides fairness to businesses who are trying to follow a code that we don’t believe is as clear as it should be," Haddock added.

Wagner has another concern: High-tech vaporizers with modified temperature settings, like Puffco and PAX Labs, bear disclaimers that their products are not intended for use of federally illegal substances, like marijuana. This presents a threat to the ordinance's intention, he believes.

"These run the gamut from disposable nicotine, CBD and marijuana pens. Rechargeable devices that are compatible with disposable pods, and more durable desktop units that are larger, more flexible and can be used with a variety of e-juices, concentrates and plant matter," Wagner said. “When we’re looking at observable facts, they don’t correspond with what we’re hearing. That makes a very difficult foundation to build a sound tax policy on when a manufacturer is publicly saying that a device could be used for one thing, but a retailer is saying it could be used for something else.”

PAX Labs, a cannabis vape pod and ESD manufacturer developed by JUUL, argued that the company's cannabis ESDs aren't compatible with nicotine pods. PAX and other cannabis industry members believe the campaigning and intent around the original ballot initiative was aimed at nicotine products.

"Our products, per manufacturing, cannot be used for purposes other than cannabis. We believe the 40 percent should not apply to them," PAX product director Colt Stander told councilmembers.

VS Strategies, a cannabis consulting firm, has proposed a separate amendment to explicitly waive cannabis ESDs in the ordinance's language.

Boulder Chamber public affairs director Andrea Meneghel cautioned that expanding the tax burden on a product that was not explicitly approved by voters may bring legal issues with the Colorado Taxpayer Bill of Rights (TABOR) amendment, which requires voter approval for local and state tax increases.

“We’ve had several attorneys call the chamber to provide unsolicited perspectives that expanding this to include cannabis can be characterized as a rather egregious TABOR violation," Meneghel warned.

The proposed amendment has been referred to the city's Cannabis Licensing and Advisory Board for further recommendations, and will be vetted by the city's finance, legal and licensing team prior to a third reading by city council, which will likely take several weeks.