When a new tax and permitting fees for vape products were first proposed by the state, local governments had two options for how the money would be collected. Gulf Shores opted to collect the full tax for city coffers and also added a $150 annual licensing fee on top of the state's $150 fee.

The idea is to keep more tax money in the city, and the additional $150 annual fee will help pay for administering the tax. Collections began Oct. 1 in the city.

Under one option, the state would be the main collector of taxes at 10 cents on every milliliter sold. Under that portion of the law, 50% of those collections would go to the state and 25% each to county and city governments, distributed quarterly based on population.

For Gulf Shores, the 25% allotted to cities would be divided among 465 municipalities. Based on the 2020 census numbers, Gulf Shores would receive 0.49% of what's collected. An example given by the city says if the 25% collected for cities was $500,000, Gulf Shores would receive about $2,500.

Provisions in the law allow local governments to levy and administer their own taxes and instead receive 100% of vape taxes collected in the city.

"We do feel that we will receive more than we would've received had we accepted the state share," Financial Services Director Anna Franklin said. "We will collect an additional $150 fee per wholesaler or retailer who sells vapor products. We will also collect $0.10 (per milliliter) within the city limits or $0.05 in the police jurisdiction."

Franklin said the licensee responsible for collecting the taxes can be the wholesaler or retailer.

"If the wholesaler remits, then the retailer must submit a sworn statement by the 20th of each month stating this has been paid by the wholesaler," Franklin said.

Since the tax just started Oct. 1, Franklin said the city doesn't know what to expect as far as increased revenues.

"We will start using October 2026 as a benchmark for trends moving forward," she said.

Currently, Gulf Shores collects 10 cents per pack of 20 cigarettes and 6.25% of the wholesale selling price for other tobacco products sold in the city. This is in addition to state taxes, which are 67.5 cents on a pack of 20 cigarettes and several other taxes on everything from cigars to chewing tobacco to snuff.

Sanford McLain owns shops in both Gulf Shores and Orange Beach, where the city opted for state taxes on vapes. In Gulf Shores, he has CBD Pharma, and in Orange Beach, his OB Vapors is inside his Undertow Bar and Grill.

"I don't have a problem with the tax," McLain said. "It's really not a lot of money when you consider vapes are 20 or 30 milliliters and the tax is 10 cents per milliliter. It's not going to affect our sales much. I wish they had done it years ago."

McLain says his wholesaler for both shops pays the tax to the state and passes the cost to him, which he in turn passes to customers.