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Vaping Taxes in the United States and Around the World

Jim McDonald
June 5, 2020

As vaping grows in popularity, it becomes a natural target for governments in need of tax revenue. Because vapor products are usually bought by smokers and ex-smokers, tax authorities correctly assume that money spent on e-cigarettes is money not being spent on traditional tobacco products. Governments have depended upon cigarettes and other tobacco products as a source of income for decades.

Whether vaping devices and e-liquid deserve to be taxed like tobacco is almost beside the point. Governments see them pushing smokers away from tobacco, and they understand that the lost revenue must be made up. Since vaping looks like smoking, and there is substantial public health opposition to vaping, it becomes an attractive target for politicians, especially because they can justify the tax with a variety of questionable health claims.

Vape taxes are now being proposed and passed regularly in the United States and elsewhere. Taxes are usually opposed by advocates for tobacco harm reduction and representatives of vaping industry trade groups and vaping consumers, and they’re usually supported by tobacco control organizations like the lung and heart associations.

Why do governments tax vaping products?

Taxes on specific products—usually called excise taxes—are applied for various reasons: to raise money for the taxing authority, to change the behavior of those being taxed, and to offset environmental, medical, and infrastructure costs created by the use of products. Examples include taxing alcohol to dissuade excessive drinking, and taxing gasoline to pay for road maintenance.

Tobacco products have long been a target for excise taxes. Because the harms of smoking impose costs on the whole society (medical care for smokers), proponents of tobacco taxes say that tobacco consumers should foot the bill. Sometimes excise taxes on alcohol or tobacco are called sin taxes, because they also punish the behavior of drinkers and smokers—and in theory help convince the sinners to quit their wicked ways.

But because the government becomes dependent on the revenue, if smoking decreases there’s a financial shortfall that must be made up with some other source of income, or else the government must reduce spending. For most governments, the cigarette tax is a significant revenue source, and the excise is charged in addition to the standard sales tax assessed on all products sold.

If a new product competes with cigarettes, many lawmakers impulsively want to tax the new product equally to make up the lost revenue. But what if the new product (let’s call it e-cigarettes) might reduce the harm caused by smoking and the associated health costs? That leaves legislators in a quandary—at least the ones who bother studying it at all.

Often state lawmakers are torn between supporting local businesses like vape shops (who don’t want a tax) and pleasing lobbyists for respected groups like the American Cancer Society and American Lung Association (which consistently support taxes on vapor products). Sometimes the deciding factor is misinformation about the supposed harms of vaping. But sometimes they really just need the money.

How do vape taxes work? Are they the same everywhere?

Most U.S. consumers pay a state sales tax on the vaping products they purchase, so state (and sometimes local) governments already benefit from vape sales even before excise taxes are added. Sales taxes are usually assessed as a percentage of the retail price of the products being purchased. In many other countries, consumers pay a “value added tax” (VAT) that works the same way as a sales tax. As for excise taxes, they come in a couple of basic varieties:

  • Retail tax on e-liquid – This may be assessed only on nicotine-containing liquid (so it’s basically a nicotine tax), or on all e-liquid. Since it’s typically assessed per milliliter, this kind of e-juice tax affects the sellers of bottled e-liquid more than it does retailers of finished products containing a small amount of e-liquid (like pod vapes and cigalikes). For example, JUUL buyers would only pay the tax on 0.7 mL of e-liquid for each pod (or just 3 mL’s per pack of pods). Because tobacco industry vaping products are all small pod-based devices or cigalikes, tobacco lobbyists often push for per-milliliter taxes
  • Wholesale tax – This kind of e-cigarette tax is ostensibly paid by the wholesaler (distributor) or retailer to the state, but the cost is always passed on to the consumer in the form of higher prices. This type of tax is assessed on the cost of the product the retailer is charged when purchasing from the wholesaler. Often the state classifies vapes as tobacco products (or “other tobacco products,” which also includes smokeless tobacco) for purposes of assessing the tax. The wholesale tax may be assessed only on products that contain nicotine, or it may apply to all e-liquid, or all products including devices that don’t contain e-liquid. Examples include California and Pennsylvania.The California vape tax is a wholesale tax that is set yearly by the state and is equal to the combined rate of all the taxes on cigarettes. It only applies to products that contain nicotine. The Pennsylvania vape tax originally applied to all products, including devices and even accessories that don’t include e-liquid or nicotine, but a court ruled in 2018 that the state couldn’t collect the tax on devices that don’t contain nicotine.

Sometimes these excise taxes are accompanied by a “floor tax,” which allows the state to collect taxes on all products a store or wholesaler has on hand the day the tax goes into effect. Typically, the retailer does an inventory on that day and writes a check to the state for the full amount. If a Pennsylvania store had $50,000 worth of merchandise on hand at inventory, the owner would have been responsible for an immediate $20,000 payment to the state. For small businesses without a lot of cash on hand, a floor tax itself can be life-threatening. The PA vape tax drove more than 100 vape shops out of business in its first year.

Vaping taxes in the United States

There is no federal tax on vaping products. Bills have been introduced in Congress to tax vapes, but none has gone to a vote of either the full House or Senate yet.

U.S. State, territory, and local taxes

Before 2019, nine states and the District of Columbia taxed vaping products. That number more than doubled in the first seven months of 2019, when the moral panic over JUUL and teenage vaping that had grabbed headlines almost every day for over a year pushed legislators to do something to “stop the epidemic.”

Currently, half of U.S. states have some kind of statewide vaping product tax. Additionally, cities and counties in some states have their own vape taxes, as do the District of Columbia and Puerto Rico.

Alaska
While Alaska doesn’t have a state tax, some municipal areas have their own vape taxes:

  • Juneau Borough, NW Arctic Borough and Petersburg have identical 45% wholesale taxes on nicotine-containing products
  • Matanuska-Susitna Borough has a 55% wholesale tax

California
The California tax on “other tobacco products” is set yearly by the state Board of Equalization. It mirrors the percentage of all taxes assessed on cigarettes. Originally this amounted to 27% of the wholesale cost, but after Proposition 56 increased the tax on cigarettes from $0.87 to $2.87 a pack, the vape tax increased drastically. For the year beginning July 1, 2020, the tax is 56.93% of the wholesale cost for all nicotine-containing products

Connecticut
The state has a two-tiered tax, assessing $0.40 per milliliter on e-liquid in closed-system products (pods, cartridges, cigalikes), and 10% wholesale on open-system products, including bottled e-liquid and devices

Delaware
A $0.05 per milliliter tax on nicotine-containing e-liquid

District of Columbia
The nation’s capital classifies vapes as “other tobacco products,” and assesses a tax on the wholesale price based on a rate that is indexed to the wholesale price of cigarettes. For the current fiscal year, ending in September 2020, the tax is set at 91% of wholesale cost for devices and nicotine-containing e-liquid

Georgia
A $0.05 per milliliter tax on e-liquid in closed-system products (pods, cartridges, cigalikes), and a 7% wholesale tax on open-system devices and bottled e-liquid will take effect Jan. 1, 2021

Illinois
A 15% wholesale tax on all vaping products. In addition to the statewide tax, both Cook County and the city of Chicago (which is in Cook County) have their own vape taxes:

  • Chicago assesses an $0.80 per bottle tax on nicotine-containing liquid and also $0.55 per milliliter. (Chicago vapers have to also pay the $0.20 per mL Cook County tax.) Because of the excessive taxes, many vape shops in Chicago sell zero-nicotine e-liquid and shots of DIY nicotine to avoid the high per-mL tax on the larger bottles
  • Cook County taxes products containing nicotine at a rate of $0.20 per milliliter

Kansas
A $0.05 per milliliter tax on all e-liquid, with or without nicotine

Kentucky
A 15% wholesale tax on bottled e-liquid and open-system devices, and a $1.50 per unit tax on prefilled pods and cartridges

Louisiana
A $0.05 per milliliter tax on nicotine-containing e-liquid

Maine
A 43% wholesale tax on all vaping products

Maryland
There is no statewide vape tax in Maryland, but one county has a tax:

  • Montgomery County imposes a 30% wholesale tax on all vaping products, including devices sold without liquid

Massachusetts
A 75% wholesale tax on all vaping products. The law requires consumers to produce proof that their vaping products have been taxed, or they are subject to seizure and a fine of $5,000 for the first offense, and $25,000 for additional offenses

Minnesota
In 2011 Minnesota became the first state to impose a tax on e-cigarettes. The tax was originally 70% of wholesale cost, but was increased in 2013 to 95% of wholesale on any product that contains nicotine. Cigalikes and pod vapes—and even starter kits that include a bottle of e-liquid—are taxed at 95% of their entire wholesale value, but in bottled e-liquid only the nicotine itself is taxed

Nevada
A 30% wholesale tax on all vapor products

New Hampshire
An 8% wholesale tax on open-system vaping products, and $0.30 per milliliter on closed-system products (pods, cartridges, cigalikes)

New Jersey
New Jersey taxes e-liquid at $0.10 per milliliter in pod- and cartridge-based products, 10% of the retail price for bottled e-liquid, and 30% wholesale for devices. New Jersey legislators voted in January 2020 to essentially double the two-tiered e-liquid tax, but the new law was vetoed by governor Phil Murphy

New Mexico
New Mexico has a two-tiered e-liquid tax: 12.5% wholesale on bottled liquid, and $0.50 on each pod, cartridge, or cigalike with a capacity under 5 milliliters

New York
A 20% retail tax on all vapor products

North Carolina
A $0.05 per milliliter tax on nicotine-containing e-liquid

Ohio
A $0.10 per milliliter tax on nicotine-containing e-liquid

Pennsylvania
Probably the best-known vape tax in the country is Pennsylania’s 40% wholesale tax. It originally was assessed on all vapor products, but a court ruled in 2018 that the tax can only be applied to e-liquid and devices that include e-liquid. The PA vapor tax shuttered more than 100 small businesses in the state during the first year after its approval

Puerto Rico
A $0.05 per milliliter tax on e-liquid and a $3.00 per unit tax on e-cigarettes

Utah
A 56% wholesale tax on e-liquid and prefilled devices

Vermont
A 92% wholesale tax on e-liquid and devices—the highest tax imposed by any state

Virginia
A $0.066 per milliliter tax on nicotine-containing e-liquid

Washington State
The state passed a two-tiered retail e-liquid tax in 2019. It charges buyers $0.27 per milliliter on e-juice—with or without nicotine—in pods and cartridges smaller than 5 mL in size, and $0.09 per milliliter on liquid in containers larger than 5 mL

West Virginia
A $0.075 per milliliter tax on all e-liquid, with or without nicotine

Wisconsin
A $0.05 per milliliter tax on e-liquid in closed-system products (pods, cartridges, cigalikes) only—with or without nicotine

Wyoming
A 15% wholesale tax on all vapor products

Vape taxes around the world

As in the United States, legislators around the world don’t really understand vapor products yet. The new products seem to lawmakers like a threat to cigarette tax revenue (which they truly are), so the impulse if often to impose high taxes and hope for the best.

International vape taxes

Albania
A 10 leke ($0.091 US) per milliliter tax on nicotine-containing e-liquid

Azerbaijan
A 20 manats ($11.60 US) per liter tax (about $0.01 per milliliter) on all e-liquid

Bahrain
The tax is 100% of the pre-tax price on nicotine-containing e-liquid. That equates to 50% of the retail price. The purpose of the tax is unclear, since vapes are supposedly banned in the country

Croatia
Although Croatia has an e-liquid tax on the books, it is currently set at zero

Cyprus
A €0.12 ($0.14 US) per milliliter tax on all e-liquid

Denmark
The Danish parliament has passed a DKK 2.00 ($0.30 US) per milliliter tax, which will take effect in 2022. Vaping and harm reduction advocates are working to reverse the legislation

Estonia
In June 2020, Estonia suspended its tax on e-liquids for two years. The country had previously imposed a €0.20 ($0.23 US) per milliliter tax on all e-liquid

Finland
A €0.30 ($0.34 US) per milliliter tax on all e-liquid

Greece
A €0.10 ($0.11 US) per milliliter tax on all e-liquid

Hungary
A HUF 20 ($0.07 US) per milliliter tax on all e-liquid

Indonesia
The Indonesian tax is 57% of the retail price, and seems to only be meant for nicotine-containing e-liquid (“extracts and essences of tobacco” is the wording). The country’s officials seem to prefer that citizens keep smoking

Italy
After years of punishing consumers with a tax that made vaping twice as expensive as smoking, the Italian parliament approved a new, lower tax rate on e-liquid in late 2018. The new tax is 80-90% lower than the original. The tax now amounts to €0.08 ($0.09 US) per milliliter for nicotine-containing e-liquid, and €0.04 ($0.05 US) for zero-nicotine products. For Italian vapers who choose to make their own e-liquid, PG, VG, and flavorings are not taxed

Jordan
Devices and nicotine-containing e-liquid are taxed at a rate of 200% of the CIF (cost, insurance and freight) value

Kazakhstan
Although Kazakhstan has an e-liquid tax on the books, it is currently set at zero

Kenya
The Kenyan tax, which was implemented in 2015, is 3,000 Kenyan shillings ($29.95 US) on devices, and 2,000 ($19.97 US) on refills. The taxes make vaping far more expensive than smoking (the cigarette tax is $0.50 per pack)—and are probably the highest vape taxes in the world

Kyrgyzstan
A 1 Kyrgyzstani Som ($0.014 US) per milliliter tax on nicotine-containing e-liquid

Latvia
The unusual Latvian tax uses two bases to calculate excise on e-liquid: there is a €0.01 ($0.01 US) per milliliter tax, and an additional tax (€0.005 per milligram) on the weight of the nicotine used

Lithuania
A €0.12 ($0.14 US) per milliliter tax on all e-liquid

Montenegro
A €0.90 ($1.02 US) per milliliter tax on all e-liquid

North Macedonia
An 0.2 Macedonian Denar ($0.0036 US) per milliliter tax on e-liquid. The law contains allows automatic increases in the tax rate July 1 of each year from 2020 to 2023

Philippines
A 10 Philippines pesos ($0.20 US) per 10 milliliters (or fraction of 10 mL) tax on nicotine-containing e-liquid (including in prefilled products). In other words, any volume over 10 mL but under 20 mL (for example, 11 mL or 19 mL) is charged at the rate for 20 mL, and so forth

Poland
A 0.50 PLN ($0.13 US) per milliliter tax on all e-liquid

Portugal
A €0.30 ($0.34 US) per milliliter tax on nicotine-containing e-liquid

Romania
A 0.52 Romania Leu ($0.12 US) per milliliter tax on nicotine-containing e-liquid. There is a method by which the tax can be adjusted annually based on consumer price increases

Russia
Disposable products (like cigalikes) are taxed at 50 rubles ($0.81 US) per unit. Nicotine-containing e-liquid is taxed at 13 rubles $0.21 US) per milliliter

Saudi Arabia
The tax is 100% of the pre-tax price on e-liquid and devices. That equates to 50% of the retail price.

Serbia
A 4.32 Serbian Dinar ($0.41 US) per milliliter tax on all e-liquid

Slovenia
A €0.18 ($0.20 US) per milliliter tax on nicotine-containing e-liquid

South Korea
The first country to impose a national vape tax was the Republic of Korea (ROK, usually called South Korea in the West)—in 2011, the same year Minnesota began taxing e-liquid. Currently the country has four separate taxes on e-liquid, each earmarked for a specific spending purpose (the National Health Promotion Fund is one). (This is similar to the United States, where the federal cigarette tax was originally earmarked to pay for the Children’s Health Insurance Program). The various South Korean e-liquid taxes add up to a whopping 1,799 won ($1.60 US) per milliliter, and there is also a waste tax on disposable cartridges and pods of 24.2 won ($0.02 US) per 20 cartridges

Sweden
A 2 krona per milliliter ($0.22 US) tax on nicotine-containing e-liquid

United Arab Emirates (UAE)
The tax is 100% of the pre-tax price on e-liquid and devices. That equates to 50% of the retail price.

Sources

Vaping360 appreciates any updates or corrections to the posted tax rates. Please comment below, and provide supporting information (newspaper articles, links to government websites, etc.) if it’s available.

Smokers created vaping without any help from the tobacco industry or anti-smoking crusaders, and vapers have the right to keep innovating to help themselves. My goal is to provide clear, honest information about the challenges vaping faces from lawmakers, regulators, and brokers of disinformation. I recently joined the CASAA board, but my opinions aren’t necessarily CASAA’s, and vice versa. You can find me on Twitter @whycherrywhy

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