Fadi Khalaf is worried a new law could send his business up in smoke — or rather, vapor.
Three months ago, Khalaf opened M Street Vape on the second floor of 1821 M St. NW and began selling e-cigs, the electronic vapor devices sometimes marketed toward people quitting smoking.
Khalaf stocks the glass counters at the front of the store with handheld vaporizers that vary in shape and size. He also sells nicotine-infused e-juice in flavors that have names like “Superman’s Ice Cream” and “Rotolo Di Zurca.”
Though his products contain no leaf tobacco, an amendment in the D.C. Council’s proposed 2016 Fiscal Year budget would tax them as if they did.
The proposed amendment would tax vape products under the “other tobacco products” category, meaning vapor products would see a 70% tax at wholesale — the same rate as cigarettes. Premium cigars, which are defined as cigars costing more than $2, are still exempt from the 70% tax.
Khalaf said the new tax would force prices increases that would largely outweigh his appeal as a boutique retailer, especially since most of the equipment and e-juices are already cheaper at online retailers.
“It’s already hard enough to open a small business,” Khalaf says. “For the local government to potentially shut my store down, with such a high tax of 70%, is unbelievable. It’s just going to drive customers across the bridge or online for their business.”
Khalaf said he feels the tax isolates small vape shops like his own. In fact, he offers discounts to customers who call and advocate against the tax.
He’s fearful that the new law would drive vapor stores out of D.C., leaving behind only major corporations who can absorb the cost with e-cigarette brands such as Blu and Njoy.
“We’re just small shops,” Khalaf says. “All those cig-alike companies you see in convenience stores are owned by big corporations. While [D.C. Council is] going for the big corporations, they’re throwing us out of the market.”
It is still unclear how the District plans to enforce the law on out-of-state wholesalers, which Khalaf and many other vapor shops uses to source their wares.
D.C. Council is scheduled to make its final vote on June 30. If passed, the law will go into effect Oct. 1.