IN THE COMMONWEALTH COURT OF PENNSYLVANIA


East Coast Vapor, LLC,                          :
                             Petitioner         :
                                                :
                      v.                        :   No. 515 M.D. 2017
                                                :   Argued: April 11, 2018
Pennsylvania Department of Revenue,             :
                       Respondent               :



BEFORE:       HONORABLE MARY HANNAH LEAVITT, President Judge
              HONORABLE RENÉE COHN JUBELIRER, Judge
              HONORABLE ROBERT SIMPSON, Judge
              HONORABLE PATRICIA A. McCULLOUGH, Judge
              HONORABLE MICHAEL H. WOJCIK, Judge
              HONORABLE CHRISTINE FIZZANO CANNON, Judge
              HONORABLE ELLEN CEISLER, Judge




OPINION BY
JUDGE COHN JUBELIRER                                FILED: June 22, 2018


       We are asked to decide whether including in the definition of “tobacco
products” under the Tobacco Products Tax Act (TPTA),1 “electronic cigarettes” (e-
cigarettes), when they do not deliver tobacco, as well as “e-liquids” that do not
contain nicotine or contain nicotine derived from a source other than tobacco,
violates the Due Process Clauses of the United States and Pennsylvania
Constitutions. East Coast Vapor, LLC (Petitioner), has filed a Petition for Review
(Petition) in this Court’s original jurisdiction and an Application for Summary Relief
(Application) on its Petition seeking a declaratory judgment that the General

       1
         Act of March 4, 1971, P.L. 6, added by Section 18 of the Act of July 13, 2016, P.L. 526,
72 P.S. §§ 8201-A–8234-A.
Assembly’s inclusion of these items under the definition of “tobacco products”
violates the Constitutions. Petitioner similarly claims that Pennsylvania Department
of Revenue’s (DOR) imposition of the TPTA tax on separately packaged component
parts of an e-cigarette that DOR considers “integral” to the e-cigarette device
violates due process because the “integral” component parts do not deliver tobacco.
Petitioner also argues that DOR’s interpretation of the TPTA as separately taxing
the “integral” component parts of an e-cigarette is unsupported by the TPTA’s plain
language and violates the Uniformity Clause of the Pennsylvania Constitution.2
DOR counters that Petitioner prematurely invoked this Court’s jurisdiction and
should have first exhausted its available administrative remedies by presenting its
claims to the Board of Finance and Revenue (Board). DOR contends that Petitioner
may not bypass the Board because Petitioner has not raised a substantial
constitutional challenge to the TPTA and the Board’s review is an available and
adequate remedy.
       Petitioner’s claim in this case, that the definition of “tobacco products” in the
TPTA, on its face, violates the right to substantive due process under the United
States and Pennsylvania Constitutions by including items that contain or deliver
nicotine even though those products are neither derived from, nor use tobacco,
constitutes a direct attack on the validity of the TPTA. Petitioner, therefore, did not
need to raise this issue first before the Board. We therefore reach the merits, and
hold that there is a rational basis for the General Assembly to define the e-cigarette
device and e-liquid that contains nicotine as “tobacco products.” However, the plain



       2
          The Uniformity Clause of the Pennsylvania Constitution provides: “All taxes shall be
uniform, upon the same class of subjects, within the territorial limits of the authority levying the
tax, and shall be levied and collected under general laws.” Pa. Const. art. VIII, § 1.


                                                 2
language of the TPTA does not support authorizing DOR to tax separately packaged
component parts of an e-cigarette that DOR considers “integral” to the e-cigarette.


I.     The TPTA and Petitioner’s Substantive Due Process Claim
       In considering the applicability of the TPTA to e-cigarettes and e-liquids, it is
helpful to understand how an e-cigarette operates. An “electronic oral device” is
generally composed of a mouthpiece, a tank, a heating element, and a battery. (Hr’g
Tr., Jan. 10, 2018, at 24, 49.)3 An “e-liquid”4 is placed into the tank, and when the
device is turned on, the battery powers the heating element, which heats the e-liquid
into a vapor. A person inhales the vapor through the mouthpiece. (Id. at 24-25, 51-
52.) This process is sometimes referred to as vaping. E-liquid can contain nicotine
in varying concentrations, up to 24 milligrams. (Id. at 52-53.)
       The TPTA imposes a 40 percent tax on “tobacco products,” which includes
“electronic cigarettes.”       Sections 1201-A, 1202-A(a.1) of the TPTA, 72 P.S.
§§ 8201-A, 8202-A(a.1).5 The TPTA defines “electronic cigarettes” as follows:

       3
          The Application included a request for special relief in the form of preliminary injunctive
relief, which, after an evidentiary hearing, this Court granted in part and denied in part by an
Opinion and Order dated January 31, 2018. East Coast Vapor, LLC v. Pa. Dep’t of Revenue (Pa.
Cmwlth., Nos. 48 M.D. 2017, 515 M.D. 2017, filed Jan. 31, 2018) (Cohn Jubelirer, J., single judge
op.) (East Coast Vapor I).
        4
          E-liquid primarily consists of propylene glycol, vegetable glycerin, water, and flavoring.
(Hr’g Tr., Jan. 10, 2018, at 52.)
        5
          Section 1201-A of the TPTA defines “tobacco products” as follows:

       (1) Electronic cigarettes.

       (2) Roll-your-own tobacco.

       (3) Periques, granulated, plug cut, crimp cut, ready rubbed and other smoking
           tobacco, snuff, dry snuff, snuff flour, cavendish, plug and twist tobacco, fine-
           cut and other chewing tobaccos, shorts, refuse scraps, clippings, cuttings and



                                                 3
       (1)      An electronic oral device, such as one composed of a heating
                element and battery or electronic circuit, or both, which
                provides a vapor of nicotine or any other substance and the use
                or inhalation of which simulates smoking.

       (2)      The term includes:

                (i)    A device as described in paragraph (1), notwithstanding
                whether the device is manufactured, distributed, marketed or sold
                as an e-cigarette, e-cigar and e-pipe or under any other product,
                name or description.

                (ii) A liquid or substance placed in or sold for use in an
                electronic cigarette.

72 P.S. § 8201-A (emphasis added).               The 40 percent tax is imposed on the
manufacture and wholesale of “electronic cigarettes,” which includes both the
device and e-liquid. 72 P.S. § 8202-A(a.1).

             sweepings of tobacco and other kinds and forms of tobacco, prepared in such
             manner as to be suitable for chewing or ingesting or for smoking in a pipe or
             otherwise, or any combination of chewing, ingesting or smoking.

       (4) The term does not include:

          (i) Any item subject to the tax under section 1206.

          (ii) Cigars.

72 P.S. § 8201-A (emphasis added). Section 1202-A(a.1) provides,

       (a.1) Imposition of tax on electronic cigarettes.--A tobacco products tax is
       imposed on the dealer or manufacturer at the time the electronic cigarette is first
       sold to a retailer in this Commonwealth at the rate of 40% on the purchase price
       charged to the retailer for the purchase of electronic cigarettes. The tax shall be
       collected for the retailer by whomever sells the electronic cigarette to the retailer
       and remitted to the department. Any person required to collect this tax shall
       separately state the amount of tax on an invoice or other sales document.

72 P.S. § 8202-A(a.1).



                                                4
       A.      Petitioner’s Argument
       Petitioner argues that the TPTA’s definition of an e-cigarette as a type of
“tobacco product” violates the Due Process Clauses of the United States and
Pennsylvania Constitutions.6            According to Petitioner, the TPTA’s definition
includes items that are neither used to deliver tobacco, nor are actually derived from
tobacco. These items include: the “electronic oral device,” i.e., the e-cigarette; the
separately packaged component parts of the e-cigarette that DOR considers
“integral” to it; “e-liquid that contains no nicotine”; and “e-liquid that contains
nicotine that is not derived from tobacco” but from another source, such as eggplants,
potatoes, or tomatoes. (Petition ¶¶ 27, 58-59, 67, 143, 180; Petitioner’s Brief (Br.)
at 28.) Therefore, according to Petitioner, these items “are both logically and
scientifically not a tobacco product.”              (Petitioner’s Br. at 31.)          The General
Assembly, Petitioner argues, sought to justify its taxation of these items on the basis
that they contain or deliver nicotine, but the General Assembly has not made the
required showing that e-cigarettes are harmful to one’s health. Moreover, according
to Petitioner, “there is no rational basis for including e-liquid . . . without nicotine in
the definition of ‘tobacco products,’” while “not taxing nicotine products sold by
pharmaceutical companies and pharmacies as ‘tobacco products.’” (Id.) Therefore,


       6
          The Due Process Clause of the Fourteenth Amendment to the United States Constitution
provides, in relevant part, that no State shall “deprive any person of life, liberty, or property,
without due process of law.” U.S. Const. amend. XIV, § 1. Due process under the Pennsylvania
Constitution emanates from a number of provisions, including article I, sections 9 and 11. Article
I, section 9 provides, in pertinent part, that a person shall not be “deprived of his life, liberty or
property, unless by the judgment of his peers or the law of the land.” Pa. Const. art. I, § 9. Article
I, section 11 provides, in pertinent part, that “[a]ll courts shall be open; and every man for an injury
done him in his lands, goods, person or reputation shall have remedy by due course of law . . . .”
Pa. Const. art. I, § 11.


                                                   5
Petitioner seeks a judgment declaring that the definition of “tobacco products” as
including items not derived or related to tobacco violates its substantive due process
rights under the United States and Pennsylvania Constitutions.


       B.      DOR’s Response – Failure to Exhaust Administrative Remedies
               1.      DOR’s Argument
       In response, DOR first argues that the Court should dismiss the Petition
because Petitioner has not exhausted its administrative remedies. DOR notes that
Petitioner claims it is aggrieved by the unlawful collection of taxes, which, DOR
argues, Petitioner may contest by petitioning the Board pursuant to Section 503(e)
of the Fiscal Code, 72 P.S. § 503(e).7 DOR claims “a cursory review of the Petition”
shows that Petitioner has not raised a substantial constitutional challenge, so it may
not bypass the administrative review process. (DOR’s Br. at 9.) Instead, Petitioner
merely alleges unconstitutionality and challenges DOR’s interpretation of the
TPTA. Petitioner has not shown, DOR argues, that it has suffered any harm because
Petitioner has paid little in taxes. DOR further argues that “‘all that [Petitioner] is
complaining about is money[,]’” that is, the amount of tax Petitioner is required to
pay based on what items are covered by the TPTA, which, if Petitioner’s
interpretation of the TPTA is correct, can be refunded to it through the administrative
process. (Id. at 11-12 (quoting Sands Bethworks Gaming, LLC v. Pa. Dep’t of
Revenue, 958 A.2d 125, 131 (Pa. Cmwlth. 2008)).)


               2.      Petitioner’s Argument

       7
           Act of April 9, 1929, P.L. 343, as amended, 72 P.S. § 503(e). Section 503(e) of the Fiscal
Code provides for a right of appeal to this Court by a party “aggrieved by the decision of the Board
. . . on a petition for refund.” Id.


                                                 6
       In response, Petitioner argues that it is not required to exhaust its
administrative remedies by going before the Board because it has brought a facial
constitutional challenge to a statute. Therefore, the administrative agency is not
competent to rule on the merits and, thus, the agency cannot provide complete and
adequate relief.


               3.      Analysis
       Whether Petitioner must exhaust its administrative remedies before invoking
this Court’s original equity jurisdiction is a threshold question.8 Under the doctrine
of exhaustion of administrative remedies, “a party must first exhaust its
administrative remedies before invoking this Court’s jurisdiction in challenging a
final agency adjudication.           The courts must refrain from exercising equity
jurisdiction when there exists an adequate statutory remedy.” Keystone ReLeaf LLC
v. Pa. Dep’t of Health, __ A.3d __, __ (Pa. Cmwlth., No. 399 M.D. 2017, filed Apr.
20, 2018), slip op. at 10 (citation omitted). The doctrine of exhaustion is codified in
the Declaratory Judgments Act,9 which sets forth that declaratory relief is not
available “with respect to any . . . [p]roceeding within the exclusive jurisdiction of a
tribunal other than a court.” Section 7541(c)(2) of the Declaratory Judgments Act,
42 Pa. C.S. § 7541(c)(2); see Section 1504 of the Statutory Construction Act of 1972,
1 Pa. C.S. § 1504 (“In all cases where a remedy is provided . . . by any statute, the
directions of the statute shall be strictly pursued, and no penalty shall be inflicted, or
anything done agreeably to the common law, in such cases, further than shall be

       8
         Our Supreme Court has said that its “decisional law is not clear as to whether the
exhaustion of statutory remedies doctrine implicates a court’s jurisdiction, or whether the rule is a
prudential concern serving as a pre-requisite to a court’s exercise of its jurisdiction.” Office of
Governor v. Donahue, 98 A.3d 1223, 1231 n.7 (Pa. 2014).
       9
         42 Pa. C.S. §§ 7531-7541.


                                                 7
necessary for carrying such statute into effect.”). The Declaratory Judgments Act
reflects “that the Legislature retains the power to channel all issues, including
constitutional ones, into a specified route of appeal, such as an administrative appeal
before a state or local agency.” Beattie v. Allegheny Cty., 907 A.2d 519, 526 (Pa.
2006); see Borough of Green Tree v. Bd. of Prop. Assessments, Appeals & Review
of Allegheny Cty., 328 A.2d 819, 823 (Pa. 1974) (stating that the equitable
jurisdiction of a trial court is subject to statutory limitations); First Fed. Sav. & Loan
Ass’n of Lancaster v. Swift, 321 A.2d 895, 898 (Pa. 1974) (noting that equity must
follow the law). In other words, equitable relief, as in the case of a declaratory
judgment action, “cannot be granted to a party [that] has an adequate remedy at law”
but has not exhausted that remedy. Cherry v. City of Phila., 692 A.2d 1082, 1084
(Pa. 1997).
      The rationale behind the doctrine of exhaustion of administrative remedies
“not only reflects a recognition of the [G]eneral [A]ssembly’s directive of strict
compliance with statutorily-prescribed remedies, it also acknowledges that an
unjustified failure to follow the administrative scheme undercuts the foundation
upon which the administrative process was founded.” Shenango Valley Osteopathic
Hosp. v. Dep’t of Health, 451 A.2d 434, 438 (Pa. 1982). If judicial intervention is
premature, occurring before the administrative remedies have been exhausted, “the
agency’s opportunity to develop an adequate factual record” is restricted, the
exercise of the agency’s expertise is limited, and “the development of a cohesive
body of law in that area” is impeded. Id. In addition, administrative review allows
“the agency . . . to correct its own mistakes and to moot judicial controversies.” St.
Clair v. Pa. Bd. of Prob. & Parole, 493 A.2d 146, 152 (Pa. Cmwlth. 1985); see
Rochester & Pittsburgh Coal Co. v. Bd. of Assessment & Revision of Taxes of



                                            8
Indiana Cty., 266 A.2d 78, 79 (Pa. 1970) (“It may well be that all problems will be
worked out at [the administrative] stage, and neither party will be required to resort
to the judicial system.”).
       There are, however, exceptions to the general rule that obviate the requirement
of exhaustion. One “narrow” exception arises where a substantial question of
constitutionality is raised. Parsowith v. Dep’t of Revenue, 723 A.2d 659, 662 (Pa.
1999). A substantial question of constitutionality is one that challenges “the validity
of the statute as a whole and not simply a challenge to the application of the statute
to a particular party.” Cherry, 692 A.2d at 1084. In other words, there must be a
facial or direct challenge to the statute, as opposed to an as-applied challenge.10 “A
facial attack tests a law’s constitutionality based on its text alone and does not
consider the facts or circumstances of a particular case.” Johnson v. Allegheny
Intermediate Unit, 59 A.3d 10, 16 (Pa. Cmwlth. 2012) (quotation omitted). In
contrast, an as-applied challenge “does not contend that a law is unconstitutional as
written but that its application to a particular person under particular circumstances
deprived that person of a constitutional right.”                Id. (quotation omitted).          An
administrative agency cannot find its enabling legislation to be unconstitutional –
only a court can do so. However, an agency can alter its interpretation of the statute


       10
           Our Supreme Court has stated that an as-applied challenge can meet the substantial
question of constitutionality test. Beattie, 907 A.2d at 528. Although our Supreme Court in Beattie
dismissed the complaint for lack of specificity, the Supreme Court asked whether “a substantial
constitutional issue c[ould] ever be present based solely upon the manner in which the governing
taxing statute is applied[,]” and concluded that it could be. Id. As an “extreme example,” our
Supreme Court posited the case where a sophisticated computer system was used to assess
hundreds of thousands of properties within a short timeframe but a patent defect in the system
caused severe disparities as to subclasses of property. Id. Under those circumstances, the Supreme
Court stated, “it would make little sense to conclude that no substantial constitutional issue was
raised simply because the relevant taxing statutes . . . were not being challenged on their face.” Id.
at 528-29.


                                                  9
to conform to constitutional principles. Lehman v. Pa. State Police, 839 A.2d 265,
276 (Pa. 2003). Thus, where a facial challenge to a statute is raised, the agency
cannot provide an adequate remedy, unlike an as-applied challenge. Borough of
Green Tree, 328 A.2d at 825.
       Our Supreme Court’s decision in Parsowith provides an example of a facial
constitutional challenge.      There, Mrs. Parsowith attacked the disparity in tax
treatment of property passing to or for use of a surviving spouse “as between widows
whose husbands died after January 1, 1995, . . . and widows whose husbands died
before the effective dates for the reduced tax rates . . . .” Parsowith, 723 A.2d at
661. This Court dismissed Mrs. Parsowith’s petition for review, concluding that she
had to exhaust her statutorily-prescribed remedies with the Board. Our Supreme
Court disagreed, holding that Mrs. Parsowith’s claim “constitutes an attack upon the
statutory scheme of taxation, rather than upon administrative interpretation alone.”
Id. The Supreme Court pointed out that all that had to be examined were the
“express provisions” of Section 2116 of the Inheritance and Estate Tax Act,11 such
as making the date the tax was due and payable as the decedent’s date of death. Id.
at 662 (emphasis added). Indeed, the Court commented, “it would be impossible to
construe the statute in any other manner than as tying the tax, including the
applicable rate and the ultimate amount of the tax, to the date of the decedent’s
death.” Id. Therefore, Mrs. Parsowith was making a “direct attack upon a legislative
scheme of taxation,” which was appropriate for judicial, not administrative, review.
Id. The Court, thus, went on to reach the merits.
       As in Parsowith, Petitioner here has brought a facial constitutional challenge
to the TPTA. Claiming that the TPTA violates substantive due process by defining

       11
        Act of March 4, 1971, P.L. 6, added by Section 36 of the Act of August 4, 1991, P.L. 97,
as amended, 72 P.S. § 9116.


                                              10
products that contain or deliver nicotine, but are not derived from or use tobacco, as
“tobacco products” subject to a 40 percent tax, is a direct attack on the TPTA. We
need not go beyond the “express provisions” of the TPTA, or engage in any
additional fact finding in order to resolve Petitioner’s claim. See id. at 662. We
simply need to decide whether it is a violation of substantive due process for the
General Assembly to define “tobacco products” as items that have or deliver
nicotine, even when these items are not derived from or use tobacco.
      Therefore, because Petitioner has raised a substantial constitutional challenge,
it does not have to exhaust its administrative remedies. Accordingly, we will address
the merits of Petitioner’s substantive due process claim.

      C.     DOR’s Response to the Merits of Petitioner’s Substantive Due
             Process Claim
             1.     Petitioner’s Argument Summarized
      Although set forth more in depth previously, Petitioner’s merits’ argument
may be summarized as it is a violation of substantive due process for the TPTA to
tax items that do not contain or deliver tobacco as “tobacco products.” Since these
items have no relation to tobacco, Petitioner argues it is irrational to call them
“tobacco products.”


             2.     DOR’s Argument
      DOR responds that there is a rational basis for taxing the “electronic oral
device” and e-liquid containing nicotine as “tobacco products.” DOR asserts that it
is rational because nicotine is common to both tobacco and some e-liquids, nicotine
is addictive, and users of e-cigarettes, particularly younger users, once addicted, may
turn to smoking cigarettes. DOR points to the General Assembly’s passage of


                                          11
Section 2 of the Tobacco Settlement Agreement Act,12 35 P.S. § 5672, as proof of
the General Assembly’s recognition of the dangers and costs associated with using
cigarettes. DOR argues that the tax helps bear the costs of harm resulting from the
use of “tobacco products,” such as e-cigarettes, while deterring younger people from
using these products because of their increased cost. These are rational bases for
taxing e-cigarettes, DOR claims. As for e-liquid allegedly containing no nicotine,
citing to a study contained in a Food and Drug Administration (FDA) Final Rule,
DOR counters that e-liquid claiming to have no nicotine, in fact, often contains
nicotine. (DOR’s Br. at 22 (citing Deeming Tobacco Prods. To Be Subject to the
Fed. Food, Drug, and Cosmetic Act, 81 Fed. Reg. 28974, 29034 (May 10, 2016) (to
be codified at 21 C.F.R. pt. 1100, 1140, 1143)).)13 Discovery of the facts is needed
on this issue, DOR argues. In any event, DOR contends, this may be a de minimis
issue because vaping devices are intended to deliver nicotine to persons addicted to
it.


              3.     Analysis
       We begin our analysis by setting forth basic due process principles. “The
substantive protections of due process are meant to protect citizens from arbitrary
and irrational actions of the government.” Gresock v. City of Pittsburgh Civil Serv.
Comm’n, 698 A.2d 163, 169 (Pa. Cmwlth. 1997) (citation omitted). In the areas of
social and economic legislation, which are important but not fundamental rights
under the Pennsylvania Constitution, the test for substantive due process is the

       12
         Act of June 22, 2000, P.L. 394, 35 P.S. § 5672.
       13
         This FDA Final Rule contains the comments and responses to the FDA’s proposed rule
to deem certain “tobacco products” as subject to the Federal Food, Drug, and Cosmetic Act. The
Final Rule is now codified at 21 C.F.R. pt. 1100, 1140, 1143.



                                             12
“Gambone [v. Commonwealth, 101 A.2d 634, 637 (Pa. 1954)] rational basis test.”
Nixon v. Commonwealth, 839 A.2d 277, 287 (Pa. 2003).14 The statute must have a
rational relationship to a valid state objective. Id. In other words, “a law which
purports to be an exercise of the police power must not be unreasonable, unduly
oppressive or patently beyond the necessities of the case, and the means which it
employs must have a real and substantial relation to the objects sought to be
attained.” Gambone, 101 A.2d at 637. When analyzing a facial constitutional
challenge, our Supreme Court has applied the “plainly legitimate sweep” standard.
Clifton v. Allegheny Cty., 969 A.2d 1197, 1224 (Pa. 2009). Under that standard, the
challenger must “demonstrate that a ‘substantial number’ of the challenged statute’s
potential applications are unconstitutional.” Id. at 1223 n.36 (citation omitted). “A
party challenging the constitutionality of a statute bears a very heavy burden” in
seeking to overcome the statute’s presumptive validity and, therefore, a statute “will
not be declared unconstitutional unless it clearly, palpably and plainly violates the
Constitution.” Peake v. Commonwealth, 132 A.3d 506, 516 (Pa. Cmwlth. 2015)
(emphasis added). Moreover, since this is an application for summary relief,
Petitioner must show that its right to judgment is clear and there are no material
issues of fact in dispute. Rule 1532(b) of the Pennsylvania Rules of Appellate
Procedure, Pa.R.A.P. 1532(b);15 Peake, 132 A.3d at 516 n.13.


       14
            Petitioner raises a substantive due process claim under both the United States and
Pennsylvania Constitutions. Our Supreme Court has described the rational basis test used in
substantive due process challenges under the Pennsylvania Constitution as “more restrictive” or
less deferential than under the United States Constitution. Nixon, 839 A.2d at 287 n.15. Therefore,
if Petitioner’s challenge fails under the Pennsylvania Constitution, it necessarily fails under the
United States Constitution.
         15
            Under Rule 1532(b) of the Pennsylvania Rules of Appellate Procedure, “[a]t any time
after the filing of a petition for review in an appellate or original jurisdiction matter the court may
on application enter judgment if the right of the applicant thereto is clear.” Pa.R.A.P. 1532(b).


                                                 13
      Since DOR relies on Section 2 of the Tobacco Settlement Agreement Act as
justification for taxing “electronic cigarettes” as “tobacco products,” we set forth the
General Assembly’s policy declarations contained therein:


      The General Assembly finds and declares as follows:

      (1) Cigarette smoking presents serious public health concerns to the
      Commonwealth and to the citizens of this Commonwealth. The
      Surgeon General has determined that smoking causes lung cancer, heart
      disease and other serious diseases and that there are hundreds of
      thousands of tobacco-related deaths in the United States each year.
      These diseases most often do not appear until many years after the
      person in question begins smoking.

      (2) Cigarette smoking also presents serious financial concerns for
      the Commonwealth. Under certain health care programs, the
      Commonwealth may provide medical assistance to eligible persons for
      health conditions associated with cigarette smoking, and those persons
      may be eligible to receive such medical assistance.
      (3) Under the health care programs described in paragraph (2), the
      Commonwealth pays millions of dollars each year to provide medical
      assistance for these persons for health conditions associated with
      cigarette smoking.

      (4) Financial burdens imposed on the Commonwealth by cigarette
      smoking should be borne by tobacco product manufacturers rather than
      by the Commonwealth to the extent that such manufacturers either
      determine to enter into a settlement with the Commonwealth or are
      found culpable by the courts.

      (5) On November 23, 1998, leading United States tobacco product
      manufacturers entered into a settlement agreement, entitled the “Master
      Settlement Agreement,” with the Commonwealth. The Master
      Settlement Agreement obligates these manufacturers, in return for a
      release of past, present and certain future claims against those
      manufacturers as described therein, to:

             (i)   Pay substantial sums to the Commonwealth, tied in part to
             those manufacturers’ volume of sales.

                                          14
             (ii)   Fund a national foundation devoted to the interests of
             public health.

             (iii) Make substantial changes in the manufacturers’
             advertising and marketing practices and corporate culture with
             the intention of reducing underage smoking.

                                         ***
35 P.S. § 5672.
      Petitioner has challenged the inclusion of both the “electronic oral device”
that is used to vape e-liquid and the e-liquid itself as “tobacco products.” Beginning
with the former, although the “electronic oral device” can be used to vape a variety
of e-liquids, some containing nicotine from a source other than tobacco and some,
allegedly, containing zero nicotine, Petitioner acknowledges that there are
“substances that can be used to vape that include nicotine derived from tobacco.”
(Petition ¶ 112.) Since, as Petitioner acknowledges, the “electronic oral device” can
be used to vape e-liquid containing nicotine derived from tobacco, the “electronic
oral device” has the capability of delivering a “tobacco product.” Therefore, there
is a rational basis for including “the electronic oral device” in the definition of a
“tobacco product.”
      As for e-liquid containing nicotine from a source other than tobacco, the
General Assembly had legitimate state objectives for electing to tax those items. The
Surgeon General attributed the prevalence of disease and death stemming from
cigarette use to nicotine, which is highly addictive. Office of Smoking and Health,
U.S. Dep’t of Health & Human Servs., The Health Consequences of Smoking:
Nicotine Addiction: a Report of the Surgeon General at 9 (1988) (concluding that
“[c]igarettes and other forms of tobacco are addicting,” that it is the nicotine
contained “in tobacco that causes addiction,” and that “[t]he pharmacologic and


                                         15
behavioral processes that determine tobacco addiction are similar to those that
determine addiction to drugs such as heroin and cocaine”).16 Persons, particularly
young persons, who start using e-cigarettes and vape e-liquid containing nicotine
from tobacco, may become addicted and turn to cigarettes, the use of which can
cause diseases that are costly to treat and sometimes deadly. In other words, the use
of an e-cigarette to vape e-liquid containing nicotine derived from tobacco is a
potential gateway to the use of cigarettes. Section 2 of the Tobacco Settlement
Agreement Act sets forth legitimate policy objectives seeking to curb the
consumption of cigarettes, particularly by young people, in order to reduce the health
and financial costs associated with smoking cigarettes.
       It was these policies that the General Assembly had in mind when the TPTA
legislation was proposed. In a March 17, 2015 House of Representatives co-
sponsorship memorandum, the co-sponsors stated that they would be introducing
legislation contained in House Bill 1213 (H.B. 1213),17 “to enact a 40 percent tax on
the wholesale price of other tobacco products (OTP) . . . which will include e-
cigarettes.” House of Representatives, Co-Sponsorship Mem., H.B. 1213, Mar. 17,
2015. The co-sponsors, citing the Centers for Disease Control and Prevention, noted
that “tobacco use is the leading preventable cause of death in the United States.” Id.
According to the co-sponsors, about 22 percent of high school students had recently
reported that they had used some kind of tobacco product. Id. In addition, the co-
sponsors stated, while “new, unregulated technologies such as e-cigarettes are often
billed as safer alternatives to traditional cigarettes,” initial lab tests had “found

       16
                  The        Surgeon       General’s       report      is       available       at
https://profiles.nlm.nih.gov/ps/access/NNBBZD.pdf. (last visited June 19, 2018).
        17
           The TPTA was ultimately included in House Bill 1198 (H.B. 1198); however, the TPTA
is similar to the legislation proposed in H.B. 1213 in that both defined e-cigarettes as a type of
“tobacco product,” and both had nearly the same definition of “electronic cigarette.”


                                               16
detectable levels of carcinogens and toxic chemicals in” them. Id. In 2013 alone,
the co-sponsors stated, “[m]ore than a quarter of a million youth who had never
smoked a cigarette used electronic cigarettes.” Id. This 40 percent tax, the co-
sponsors asserted, would not only “serve as a barrier for people, especially children,
to use OTPs and cigarettes, [but] it also will provide a significant source of revenue
to the Commonwealth . . . .” Id. Once H.B. 1213 was introduced, the co-sponsors
issued a news release, with one co-sponsor stating that “[m]any teens succumb to
peer pressure by using tobacco products and end up becoming life-time users.”
News Release, Pa. House, Daley, Frankel Legislation Calls for Tax Increase on
Cigarettes,         Other        Tobacco           Products         (May          21,        2015),
http://pahouse.com/MDaley/InTheNews/NewsRelease/?id=66491 (last visited June
19, 2018). This co-sponsor found it “troubling” that “there are now alternative
products, such as e-cigarettes, that are growing in popularity and have the same
addicting effects as regular cigarettes.” Id. (emphasis added).
       Another state representative, in a co-sponsorship memorandum dated March
3, 2015, stated that he would soon introduce legislation, House Bill 1461 (H.B.
1461), to amend “the Tax Reform Code of 1971 to tax electronic cigarettes.” House
of Representatives, Co-Sponsorship Mem., H.B. 1461, Mar. 3, 2015.18 This state
representative stated that “the use of alternative nicotine products has been gaining
popularity in the last few years,” partly because people were using e-cigarettes to
wean themselves off cigarettes. Id. While the state representative found this
commendable, “cigarette taxes exist to raise funds for public health initiatives and

       18
          This legislation would have defined the e-cigarette device as a “vapor product,” and the
e-liquid “solution or other material containing nicotine that is depleted as a vapor product is used”
as a “[c]onsumable product.” H.B. 1461, 2015 Sess. (Pa. 2015). H.B. 1461 would have imposed
a tax “upon the sale or possession of vapor products within this Commonwealth at the rate of 5¢
per fluid milliliter of consumable product.” Id.


                                                17
to discourage our youths from smoking.          As more people turn to electronic
cigarettes, we need to re-capture the revenue necessary to keep those programs
funded and discourage young people from getting hooked on nicotine.” Id.
(emphasis added). The proposed tax, he stated, would “walk the line” between
“funding vital programs and discouraging young people from picking up potentially
deadly habits, while not overburdening people” trying to quit smoking cigarettes.
Id.
      These express statements demonstrate that the General Assembly was
concerned that young people who started using e-cigarettes would become addicted
to nicotine and turn to cigarettes, the use of which can cause deadly diseases. It is
undisputed that some e-liquid contains nicotine. At the preliminary injunction
hearing, Joshua Sanders, Petitioner’s owner, testified that Petitioner carries e-liquid
containing varying concentrations of nicotine, ranging from 0 milligrams up to 24
milligrams. (Hr’g Tr., Jan. 10, 2018, at 52-53.) Petitioner has never alleged that the
nicotine contained in e-liquid, albeit allegedly derived from a source other than
tobacco, is any different than the nicotine contained in tobacco or any less addicting.
Since nicotine is common to both tobacco and e-liquid, and Petitioner has never
claimed that the nicotine found in tobacco is any different than the nicotine found in
e-liquid, it makes no difference that the nicotine contained in e-liquid contains
nicotine from a source other than tobacco. It is, therefore, not “unreasonable, unduly
oppressive or patently beyond the necessities of the case” to tax a product that is
similar to tobacco, when it contains nicotine and is addictive, as a tobacco product.
Gambone, 101 A.2d at 637.
      Moreover, the taxation of e-liquid that contains nicotine and the “electronic
oral device” that can deliver such e-liquid bears a rational relationship to valid state



                                          18
objectives, as the tax is designed to increase the cost to the consumer, which has the
effect of discouraging consumption. With less consumption of e-cigarettes, fewer
people may become addicted to nicotine, turn to cigarettes, and suffer the health
problems associated therewith, which will, concomitantly, lower the health costs of
having to treat the diseases associated with smoking.
       In short, the General Assembly could have rationally concluded that taxing e-
liquid that contains nicotine and the e-cigarette device that can deliver e-liquid
containing nicotine as “tobacco products” under the TPTA would promote the
legitimate state objectives identified in Section 2 of the Tobacco Settlement
Agreement Act.
       As for Petitioner’s claim about zero-nicotine e-liquid, we need not consider
that claim in this facial constitutional challenge. As previously stated, in order to be
successful, a facial constitutional challenge requires the challenger to “demonstrate
that a ‘substantial number’ of the challenged statute’s potential applications are
unconstitutional.” Clifton, 969 A.2d at 1223 n.36. Taxing e-liquid that contains
nicotine and the “electronic oral device” used to deliver such e-liquid as “tobacco
products” is plainly legitimate. E-liquid that contains nicotine and the “electronic
oral device” used to deliver such e-liquid covers a substantial number of potential
applications of the TPTA. Thus, regardless of whether it may violate substantive
due process to tax zero-nicotine e-liquid as a “tobacco product,” Petitioner cannot
succeed on its facial constitutional challenge to the TPTA.19 Moreover, to the extent

       19
          We do not address Petitioner’s argument that taxing the “integral” component parts of
an e-cigarette violates substantive due process because, as we discuss in the following section, the
“integral” component parts of an e-cigarette are not taxable under the TPTA. Therefore, it is
unnecessary to decide the substantive due process claim as it relates to the “integral” component
parts of an e-cigarette. See Johnson v. Dep’t of Transp., Bureau of Driver Licensing, 805 A.2d
644, 648 n.5 (Pa. Cmwlth. 2002) (stating that “when a case raises both constitutional and non-



                                                19
zero-nicotine e-liquid exists as a factual matter, DOR will have an opportunity to
interpret and apply the TPTA to those types of e-liquids. Lehman, 839 A.2d at 276
(noting that the agency has the authority “to interpret the statute it is charged with
administering to avoid an unconstitutional application”).

II.    The TPTA and Petitioner’s Claim that DOR May Not Tax Separately
       Packaged “Integral” Component Parts of an E-cigarette Under the
       Statutory Language20
       A.      The Parties’ Competing Constructions of the TPTA21
               1.      Petitioner’s Argument
       Petitioner, noting that a taxing statute must be strictly construed, argues that
DOR has rewritten the TPTA by taxing separately packaged component parts of an
e-cigarette that DOR considers “integral.” Petitioner points out that the TPTA does
not contain the word “integral” and argues that the definition of “electronic
cigarette” is limited to the “entire e-cigarette device” and the e-liquid or substance
placed in the e-cigarette, not its individual component parts. (Petitioner’s Br. at 23.)
The General Assembly, Petitioner argues, could have easily defined an e-cigarette
to include “integral” component parts if the General Assembly had wanted those
items taxed when packaged separately, but it did not do so. Petitioner asserts that
DOR has, therefore, rewritten the TPTA, which it may not do. While DOR attempts
to justify its interpretation on the basis that an e-cigarette could be sold disassembled


constitutional issues, the court should not reach the constitutional issues if the case may properly
be decided on non-constitutional grounds”).
        20
           A more detailed discussion of the factual background of this claim can be found in East
Coast Vapor I.
        21
           Although this is a statutory construction claim, and DOR argues that this claim should
be subject to the exhaustion requirement, since Petitioner has also raised a facial constitutional
challenge, we will decide all of Petitioner’s claims.



                                                20
in order to evade the tax, that issue is for the General Assembly to resolve, Petitioner
argues. Based on Petitioner’s interpretation of the TPTA, it claims that it owes a
“Floor Tax” of only $2491,22 and not, as DOR agents determined after conducting
an inventory of Petitioner’s shops in January 2017, a Floor Tax of $30,691.58 before
any penalties are assessed.


               2.      DOR’s Argument
       DOR argues that “integral” component parts are those that can only be used
in an e-cigarette. (Hr’g Tr., Jan. 10, 2018, at 141-43.) Previously, DOR had used a
more expansive definition of component parts, but DOR has narrowed its definition
to “integral” component parts, such as replacement coils, regulated mods, and tanks.
(Id. at 143); Kingdom Vapor v. Pa. Dep’t of Revenue (Pa. Cmwlth., No. 697 M.D.
2016, filed Jan. 31, 2018) (Cohn Jubelirer, J., single judge op.), slip op. at 17
(Kingdom Vapor I).23 DOR contends that its interpretation of the TPTA’s definition

       22
           The TPTA imposes a one time “Floor Tax,” requiring “[a]ny retailer that, as of . . .
[October 1, 2016], possesses tobacco products subject to the tax imposed by Section 1202-A” to
pay the 40 percent tax specified in Section 1202-A of the TPTA, as reported by the retailer on a
form prescribed by DOR, by December 30, 2016. Section 1203-A(a)(1) of the TPTA, 72 P.S.
§ 8203-A(a)(1). In East Coast Vapor I, this Court ordered, inter alia, Petitioner to pay a Floor Tax
of $2491, which DOR indicates Petitioner has paid. (DOR’s Br. at 4-5.)
        23
           The preliminary injunction hearing in East Coast Vapor I was heard with a request for
preliminary injunctive relief in Kingdom Vapor I during which DOR and Kingdom Vapor
stipulated to definitions of various vaping products, including replacement coils, regulated mods,
and tanks. Petitioner has incorporated these definitions into its brief, which are as follows:

       Replacement Coils: These are made from resistance wire and are used in a tank.

       Regulated Mod: A power supply for an attached tank or atomizer. The device has
       a digital display allowing the user to adjust various settings. Without a
       tank/atomizer this cannot be used as an e-cigarette . . . .




                                                21
of “electronic cigarettes” to include their separately packaged “integral” component
parts is correct because otherwise vaping companies would simply disassemble the
e-cigarette device, sell its parts separately, and have the purchaser reassemble the e-
cigarette so as to evade the tax. The General Assembly, DOR argues, did not intend
such an absurd result.


       B.      Analysis
       “Our goal in interpreting a statute is to ascertain and effectuate the intent of
the legislature.” Mission Funding Alpha v. Commonwealth, 173 A.3d 748, 757 (Pa.
2017). In general, the best indicator of the intent of the General Assembly is the
plain language of the statute. Id. Words are to be construed in accordance with the
rules of grammar and their common and approved usage or, when proper, according
to their peculiar and appropriate or statutorily provided meanings. Section 1903(a)
of the Statutory Construction Act of 1972, 1 Pa. C.S. § 1903(a). “[I]f the language
of a statute is clear and unambiguous, a court must read its provisions in accordance
with their plain meaning and common usage.” Mission Funding Alpha, 173 A.3d at
763. However, the general rule that the plain language of the statute is the best
indicator of the General Assembly’s intent “is subject to several important
qualifications, including . . . that the General Assembly does not intend a result that
is absurd, impossible of execution, or unreasonable.” Mercury Trucking, Inc. v. Pa.
Pub. Util. Comm’n, 55 A.3d 1056, 1068 (Pa. 2012) (citation omitted); see Section


                                              ***
       Tanks: A part that holds a certain volume of e-liquid and contains a coil/heating
       element. Used in the PA Medical Marijuana industry and are tax exempt when
       used for that purpose.

Kingdom Vapor I, slip op. at 6-7 n.8; (see also Petitioner’s Br. at 7 n.3).


                                                 22
1922(1) of the Statutory Construction Act of 1972, 1 Pa. C.S. § 1922(1) (setting forth
the presumption that the legislature does not intend an absurd result). In undertaking
our analysis, we must keep in mind, that “[p]rovisions imposing taxes” must “be
strictly construed,” Section 1928(b)(3) of the Statutory Construction Act of 1972, 1
Pa. C.S. § 1928(b)(3), and “any doubt or uncertainty as to the imposition of the tax
must be resolved in favor of the taxpayer.” Pa. Power & Light Co. v. Bd. of Fin. &
Revenue, 717 A.2d 504, 507 (Pa. 1998).
      We begin with the plain language of the TPTA. The TPTA defines “tobacco
products” to include “electronic cigarettes,” which it further defines, in relevant part,
as “[a]n electronic oral device, such as one composed of a heating element and
battery or electronic circuit, or both, which provides a vapor of nicotine or any other
substance and the use or inhalation of which simulates smoking.” 72 P.S. § 8201-A
(emphasis added). As can be seen from the plain language of the TPTA, Section
1201-A does not include the term “integral” or “component parts.” Instead, it refers
to a singular, integrated device that contains both a heating element and a power
source, which, working together, provides a vapor. (Hr’g Tr., Jan. 10, 2018, at 50-
51, 143 (testimony that the coil replacement contains a piece of wire that is used to
heat the e-cigarette).) Therefore, “integral” component parts of an e-cigarette do not
fit within the definition of “electronic cigarette.”
      What DOR would have us do, if we were to adopt its interpretation, is add
terms to the TPTA under the guise of interpreting it, which we may not do. Shafer
Elec. & Constr. v. Mantia, 96 A.3d 989, 994 (Pa. 2014) (“[I]t is not for the courts to
add, by interpretation, to a statute, a requirement which the legislature did not see fit
to include.”) (citation omitted). Had the General Assembly wanted to include as
taxable the “integral” component parts of an e-cigarette, it could have easily done



                                           23
so, as the federal statute does. See Section 201(rr)(1) of the Federal Food, Drug, and
Cosmetic Act, 21 U.S.C. § 321(rr)(1) (defining a “tobacco product” as “any product
made or derived from tobacco that is intended for human consumption, including
any component, part, or accessory of a tobacco product (except for raw materials
other than tobacco used in manufacturing a component, part, or accessory of a
tobacco product)”) (emphasis added); Deeming Tobacco Prods. To Be Subject to the
Fed. Food, Drug, and Cosmetic Act, 81 Fed. Reg. at 28975 (interpreting the
“components” and “parts” of a “tobacco product” to include atomizers and batteries
used in an e-cigarette). However, the General Assembly did not do so, and, contrary
to DOR’s assertion, a plain language interpretation of the TPTA does not lead to
absurd results that would require us to otherwise rewrite the TPTA.
      We can posit rational reasons why the General Assembly might have chosen
to tax only the “electronic oral device” and not its component parts. The General
Assembly might have thought, with the TPTA’s already high rate of taxation, that
also including the component parts of an e-cigarette would drive vaping companies
out of business. The General Assembly might also have desired the TPTA to be
easily administered and applied so that both the DOR and vaping companies would
know what items are taxable. Of course, as with any tax, there will be some who
seek to avoid or evade the tax. DOR, however, has the power to enforce the law and
to lobby the legislature should evasion of the TPTA tax by disassembly of the
“electronic oral device” prove to be widespread. We conclude that a plain language
interpretation of the TPTA does not lead to absurd results merely because some
vaping companies may attempt to evade the tax.




                                         24
       Therefore, we hold that DOR’s interpretation of the TPTA to include as
taxable separately packaged component parts of an e-cigarette that DOR considers
“integral” is unsupported by the plain language of the TPTA.24
       III.    Conclusion
       Petitioner has raised a facial constitutional challenge to the TPTA by claiming
that it is a violation of substantive due process for the TPTA to tax, as “tobacco
products,” products that contain or deliver nicotine even though those products are
not derived from, nor use tobacco. This challenge may be presented to us without
Petitioner first having to exhaust its administrative remedies. However, it is not a
violation of substantive due process for the TPTA to tax as “tobacco products” the
“electronic oral device” because it may be used to deliver e-liquid containing
nicotine from tobacco. Nor is it a violation of substantive due process for the TPTA
to tax as “tobacco products” e-liquid that contains nicotine from a non-tobacco
source because the use of such e-liquid may lead the e-cigarette user to start smoking
cigarettes.     As such, Petitioner’s facial constitutional challenge must fail.
Petitioner’s statutory construction claim, on the other hand, has merit. A plain
reading of the TPTA does not support including the separately packaged component
parts of an e-cigarette that DOR considers “integral” in the definition of “electronic
cigarette.” Those “integral” component parts of the e-cigarette device are not taxable
under the TPTA. Therefore, we will grant the Petition and Application in part and
deny it in part, and declare that these “integral” component parts of the e-cigarette
device are not taxable under the TPTA.



       24
            Although Petitioner also argues that DOR’s interpretation of the TPTA constitutes a
violation of the Uniformity Clause, Pa. Const. art. VIII, § 1, and the separation of powers doctrine,
in light of our determination we need not address those arguments. Johnson, 805 A.2d at 648 n.5.


                                                25
_____________________________________
RENÉE COHN JUBELIRER, Judge




 26
        IN THE COMMONWEALTH COURT OF PENNSYLVANIA


East Coast Vapor, LLC,                    :
                          Petitioner      :
                                          :
                   v.                     :   No. 515 M.D. 2017
                                          :
Pennsylvania Department of Revenue,       :
                       Respondent         :


                                       ORDER


      NOW, June 22, 2018, the Application of East Coast Vapor, LLC (Petitioner),
for Summary Relief (Application) on its Petition for Review is GRANTED to the
extent it requests declaratory relief regarding the interpretation of the Pennsylvania
Department of Revenue (DOR) to include as taxable under the Tobacco Products
Tax Act (TPTA), Act of March 4, 1971, P.L. 6, added by Section 18 of the Act of
July 13, 2016, P.L. 526, 72 P.S. §§ 8201-A–8234-A, the separately packaged
component parts of an electronic cigarette (e-cigarette) that DOR considers
“integral” to the e-cigarette. The Court hereby DECLARES that such “integral”
component parts of an e-cigarette are not taxable under the TPTA. Petitioner’s
Application is DENIED to the extent it requests declaratory relief under the Due
Process Clauses of the United States and Pennsylvania Constitutions.



                                        _____________________________________
                                        RENÉE COHN JUBELIRER, Judge