For the better part of three years, Chris Hughes ran a profitable vape shop off Interstate 180 halfway between Montoursville and Williamsport.A steady flow of regulars came through the Fat Cat for refills of their favorite flavors. Like many shops, one end was furnished with a sofa, a flatscreen and plenty of art hanging on the wall so customers could puff away in comfort.Everything that happens in Harrisburg creates winners and losers, though.

And few businesses lost more in Pennsylvania's 2016 budget than vape shops, many of them sole proprietorships that were suddenly hit with a 40 percent "floor tax" on their inventories and a 40 percent tax on all future sales.
Today, the 52-year-old Hughes works night shift at a granola factory as he steers the Fat Cat toward bankruptcy. Hughes doesn't expect he'll be opening another business anytime soon with a bank default in his rearview.

He's given up on vaping. Now he smokes three or four cigarettes a day."I had gone a few years without," he said. "The stress of everything, you know, it gets you back to it."Anecdotes like that of the Fat Cat abound as the shops faced massive tax bills to be paid in full by the end of last year. Hughes, just one example, sold off as much of his inventory and furnishings as he could and closed up shop when faced with a $40,000 floor tax.

Last fall, Hughes and others tried to no avail to rally support for legislation to reduce the tax burden. Now, the vape shops have banded together once again -- with real lobbying power behind them -- to try again.They cleared the first hurdle this week when a bill that would replace the wholesale tax with a 5-cents per milliliter retail tax on e-liquid passed out of committee toward a full Senate vote.

"You get a lot more revenue from businesses that are open than businesses that are closed," the bill's sponsor, Sen. Camera Bartolotta, R-Washington County, said.Of course, scaling back a revenue source -- albeit one that has dealt a blow to dozens of small businesses -- may be a difficult sell as the Legislature stares down $3 billion budget deficit.

Last year, when the vape tax was included in the final budget, it was estimated to bring in $13.3 million. According to the Department of Revenue, the state has collected $7 million in e-cigarette taxes and another $13.2 million from the floor tax through March, with three months left in the 2016-17 fiscal year. The floor tax, of course, is a one-off. Once businesses paid the tax on their inventories, the tax shifts to future sales. Chuck Huff, president of the newly formed Pennsylvania Vape Association, said the 40 percent wholesale tax is too much for smaller vape shops. The new tax forced the 65-year-old IT specialist to close his online retail business last year, although his virtual store didn't have the same overhead costs as Hughes' brick-and-mortar operation.

Based on a survey the association conducted of known vape shops, Huff said 110 stores have closed since January 2016. Many of the owners polled said the decision was based on Pennsylvania's new tax, he said. Others cited new restrictions that the Food and Drug Administration is rolling out against vape products.

Hughes, meanwhile, has found purpose in fighting vape taxes. A month ago, he traveled to Rhode Island to oppose a similar wholesale tax on vape products there.
"I'll bounce back and find a new career," he said. "I don't mind what I'm doing now but it's pretty hard work, going into a factory, busting it out, after sitting around a store."