Tennessee, USA, recently plans to impose a 10% consumption tax on e-cigarette products. If the bill is passed, it will become one of the regions with the highest tax rates in the United States. This policy aims to curb the rising rate of youth use and increase fiscal revenue, but it has triggered a strong backlash in the industry.
Industry warning cost crisis: Companies generally worry that taxes will cause terminal prices to rise by 20%-30%, and small and medium-sized brands may face bankruptcy due to profit compression. It is estimated that more than 300 retail stores and manufacturers in the state will be affected. Youth prevention and control controversy: Supporters believe that high tax rates can reduce the purchasing power of teenagers, but opponents point out that illegal low-priced products may take the opportunity to flood into the market, making supervision more difficult.
Against the backdrop of stricter global e-cigarette regulation, the brand VEEHOO has become a reference case for the industry to cope with policy risks with its technical compliance, market agility and social responsibility practices.
VEEHOO has reduced production costs by 15% and offset potential tax pressure by developing low-power atomization chips and recyclable cartridges. Its products use an age verification system (ID card information must be bound to unlock the device), which complies with the US FDA youth protection standards and avoids additional penalties due to compliance defects.
Differentiated pricing: Focusing on middle- and high-income adult users, providing products with nicotine salt replacement formulas, the target group with lower price sensitivity has a higher tolerance for tax rate increases. Medical channel expansion: Cooperating with smoking cessation clinics, some products are included in the nicotine replacement therapy (NRT) system to enjoy tax benefits for medical products.
VEEHOO uses blockchain technology to track the entire process from raw material procurement to retail terminals to achieve dynamic allocation of tax rate costs. For example, by adjusting the warehouse layout (such as giving priority to the use of Tennessee bonded warehouses), the tax burden in the circulation link can be reduced by 8%.
Tennessee tax reform may accelerate the polarization of the e-cigarette industry: Small and medium-sized brands are in a survival crisis: Companies that rely on low-price strategies will exit the market due to zero profits, and illegal smuggling products may fill the gap.
Competitive advantage of compliance leaders: VEEHOO and other companies are expected to reap market share through technology cost reduction, tax planning and channel innovation. Its 38% revenue growth in the North American market in 2024 has confirmed this trend. Game between regulation and innovation: Policymakers need to balance tax targets and market health. Referring to Thailand’s “severe crackdown on illegality + support for compliance” model (such as establishing a white list of harm reduction product certification) may be a feasible direction.
Tennessee’s e-cigarette tax reform is both a challenge and an opportunity for industry upgrading. VEEHOO has demonstrated the risk resistance of leading brands through technological innovation, market reconstruction and compliance pre-positioning. In the future, the e-cigarette industry may enter the “era of high compliance costs”. Only companies with both technical strength and social responsibility can cross the cycle and lead sustainable growth.
Tags: taxation of e-cigarette products, smokeless nicotine products, harm to children and adolescents, veehoo vape