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Vaping Taxes in the United States and Around the World

Jim McDonald
February 11, 2019

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 tobacco tax-addicted politicians.

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 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 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 U.S. states, the cigarette tax is a major 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.

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 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, with this kind of excise tax 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 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 usually 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 last year a court ruled 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 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.

U.S. state and local vaping taxes

There is no federal tax on vaping products. But a 2019 bill introduced in the U.S. House of Representatives by Connecticut Democrat Rosa DeLauro would impose taxes at the same rate as cigarettes and other tobacco products. The legislation (which would also ban flavors and restrict online sales) is new and hasn’t yet been heard in a committee. Like all bills, if it passes the House it will then have to repeat the process in the Senate. Finally, if it passes both houses of Congress, it will go to the President to either sign into law or veto.

State 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 the previous year pushed legislators to “do something to stop the epidemic.”

Additionally, cities and counties in three states have their own vape taxes.

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

  • Juneau Borough, NW Arctic Borough and Petersburg – Two boroughs (Alaska has boroughs rather than counties) and a city have identical 45% wholesale taxes on nicotine-containing products
  • Matanuska-Susitna Borough – The borough that borders Anchorage 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, 2019, the tax is 59.27% of the wholesale cost for all nicotine-containing products

Connecticut
The state passed a two-tiered tax in 2019, assessing $0.40 per milliliter on e-liquid in closed products like pods and cigalikes, and 10% wholesale on all other vapor products, including bottled e-liquid and devices

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

Illinois
In addition to a statewide 15% wholesale tax on vaping products, passed in 2019, both Cook County and the city of Chicago (which is also part of Cook County) have their own vape taxes. Chicago Mayor Rahm Emanuel has been a determined enemy of vaping, and has advocated not just for the current tax, but also for a flavor ban and an additional, larger tax

  • Chicago – assesses an $0.80 per bottle tax on nicotine-containing liquid and also $0.55 per milliliter. (On top of that, Chicago vapers have to also pay the $0.20 per mL Cook County tax.) Because of the excessively large 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 tax of $0.05 per milliliter is charged on all e-liquid, with or without nicotine

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

Maine
Maine legislators passed a 43% wholesale tax on vaping products in 2019. It will take effect Jan. 2, 2020

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 without liquid

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
Nevada passed a 30% wholesale tax on vapor products in 2019. It will take effect Jan. 1, 2020

New Jersey
New Jersey passed a tax of $0.10 per milliliter on nicotine-containing e-liquid in 2018. In 2019, the tax was revised. It remains as is on pods and cartridges—$0.10 per milliliter—but bottled e-liquid will now be taxed at 10%. That’s a win for consumers, who’ll pay much less on bottles of e-juice. The change will take effect on Dec. 1, 2019

New Mexico
In 2019, New Mexico passed a two-tier e-liquid tax: 12.5% wholesale on bottled liquid, and $0.50 on each pod or cartridge with a capacity under 5 milliliters

New York
Legislators passed a 20% retail tax on all vapor products in 2019. It will take effect Dec. 1, 2019

North Carolina
One of the earliest e-liquid taxes was passed in North Carolina, the home of RJ Reynolds and thousands of tobacco farms. The state assesses a $0.05 per milliliter tax on nicotine-containing e-liquid

Ohio
A tax of $0.10 per milliliter is assessed 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

Vermont
The state has a 92% wholesale tax on e-liquid and devices — the highest tax in any state

Washington, D.C.
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 cost of cigarettes. For the current fiscal year, ending in September 2019, the tax is set at 96% of the wholesale cost for devices and nicotine-containing e-liquid — the highest percentage tax in the U.S.

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 tax of $0.075 per milliliter is charged on all e-liquid, with or without nicotine

Wisconsin
A tax of $0.05 per milliliter is assessed on all e-liquid

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 tax of 10 leke ($0.091 US) per milliliter is charged on nicotine-containing e-liquid

Azerbaijan
This new tax, which takes effect on Feb. 10, 2019, is 20 manats ($11.60 US) per liter, or 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 tax of €0.12 ($0.14 US) per milliliter is charged on all e-liquid

Estonia
A tax of €0.20 ($0.23 US) per milliliter is charged on all e-liquid

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

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

Hungary
A tax of HUF 70 ($0.25 US) per milliliter is charged 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 the 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 2018 tax 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

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

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

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

Poland
The Polish parliament passed an excise tax on e-liquid in 2017, but has postponed implementing it. The tax is currently set at zero until June 30, 2020

Portugal
A tax of €0.60 ($0.68 US) per milliliter is charged on nicotine-containing e-liquid

Romania
A tax of €0.11 ($0.12 US) per milliliter is charged on nicotine-containing e-liquid. There is a method by which the tax can be adjusted annually based on consumer price increases

Russia
Disposable “ENDS” products (like cigalikes) are taxed at 40 rubles ($0.61 US) per unit. Nicotine-containing e-liquid is taxed at 10 rubles $0.15 US) per milliliter

Serbia
A tax of RSO 4.24 ($0.04 US) per milliliter is charged on all e-liquid

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

South Korea
The first country to impose a national vape tax was the Republic of Korea (South Korea) — 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 — CHIP). 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 (cartomizers and pods) of 24.2 won ($0.02 US) per 20 cartridges

Sweden
A tax of 2,000 krona ($215.92 US) per liter (or 2 krona per milliliter — $0.22 US) is charged on nicotine-containing e-liquid

Will the EU impose a vape tax soon?

In January 2018, the European Commission decided not to impose an EU-wide tax on vapor products immediately. The decision was attributed to a lack of information about the vaping market, which the commission believes will be remedied through the reporting requirements in the Tobacco Products Directive (TPD).

The tax issue will be revisited in 2019 as part of a re-evaluation of the TPD. At that time it is possible the commission will pursue implementation of taxes on e-cigarettes and other vaping products.

Sources

Vaping360 appreciates any updates or corrections to the posted tax rates. Please comment below. Please 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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