Vape tax by state: 2023 e-cigarette tax guide

E-cigarettes and vaping products weren’t regulated or taxed like other tobacco products when they first entered the U.S. market in the mid-2000s. In fact, at the outset, they were largely unregulated and untaxed.

Those salad days are coming to an end. Today, many states impose a vape tax for consumers.

One reason electronic nicotine delivery systems (ENDS) were initially exempt from the taxes applied to cigarettes and other tobacco products (OTP) is because they were considered a more healthful alternative. Cigarette and tobacco taxes are imposed to decrease consumption of potentially harmful products as much as to increase tax collections.

When it comes to health, many people still believe vaping is better than smoking, but a different narrative is emerging due to the popularity of e-cigarettes and vape products among teens and young adults. There’s concern vaping could inspire young nonsmokers to seek out nicotine elsewhere (the so-called gateway effect). Thus while e-cigarettes could help seasoned smokers cut back, they could actually foster cigarette smoking among young people.

Whatever the cause, more and more governments are imposing new regulations and taxes on e-cigarettes, vaping products, and similar products.

New requirements for vape distributors, manufacturers, and sellers

The expanded Prevent All Cigarette Trafficking Act (PACT Act), enacted March 2021, requires any business or person that sells, ships, or transfers ENDS for profit in interstate commerce to:

  • Register with the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF)
  • Register with any states where they ship vapes and similar products
  • Verify the age of purchasers upon delivery
  • Comply with state, local, or tribal excise tax and reporting requirements

Basically, the amended PACT Act requires e-cigarettes and vaping products to be treated more like traditional tobacco cigarettes. 

Are there federal taxes on vape products?

There are no federal taxes on vape products as of this writing, but that could change. The first draft of President Biden’s Build Back Better Act of 2021 included a new tax on nicotine for use in vaping products, but it was struck from the final version of the Inflation Reduction Act of 2022.

That’s not the case with tobacco, which according to the National Institutes of Health was one of the first consumer products to be taxed in North America, “first by the British and then by the newly independent republic in the early 1790s.” There have been federal taxes on tobacco since the Civil War.

Today, federal excise taxes on cigarettes, cigars, chewing tobacco, pipe tobacco, snuff, and other tobacco products are administered by the Alcohol and Tobacco Tax and Trade Bureau, or TTB. Cigarettes, small cigars, and smokeless tobacco are generally taxed per unit (e.g., per cigarette or pack of cigarettes), while large cigars are typically subject to an ad valorem tax (i.e., a percentage of the retail or wholesale price).

Do states tax vape products?

More than 30 states currently tax vape products: California, Colorado, Connecticut, Delaware, Georgia, Illinois, Indiana (as of July 1, 2022), Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, and the District of Columbia. That’s a big change since 2015, when only three states and D.C. had a vape tax.

More states will likely tax electronic nicotine delivery systems in the future since some — including Alaska, Iowa, Oklahoma, and Tennessee — have already tried to do so. And some states that already tax vaping products may opt to raise the rates in 2023. Kentucky introduced a measure to increase tax rates on vape and other tobacco products, but the bill didn’t pass. 

Are there local taxes on vape products?

Local taxes on vape products exist in just a few states as of this writing.

Alaska and Nebraska don’t tax e-cigarettes at the state level, but some jurisdictions apply local taxes. Notably:

On top of statewide taxes, there are local vape taxes in a few jurisdictions in Illinois (Chicago and Cook County) and Maryland (Montgomery County).

Alabama, Colorado, Missouri, New York, Ohio, Pennsylvania, and Virginia also allow local governments to levy local taxes on vapor products.

Vape taxes: The devil’s in the details

Because of the varied nature of electronic nicotine delivery systems (ENDS), vape taxes can be shaped by several different factors.

As with cigarettes and other tobacco products, e-cigarettes, vapes, and other ENDS are typically taxed either on a unit basis or on a percentage of the retail or wholesale price. Each jurisdiction defines the percentage tax base a little differently.

Most states that tax vaping products use either the percentage or the unit. However, Connecticut, Georgia, Kentucky, New Hampshire, New Jersey, and New Mexico use both methods: They use the unit (per cartridge) for closed vaping products and a percentage of the price for open vaping products. 

Open vs. closed vs. disposable

Vape taxes based on the unit may be affected by the type of cartridge used to contain the e-liquid: open or closed. Some states base the tax on the cartridge and/or disposability, some on each milliliter (or fraction of a milliliter) of e-liquid purchased.

With open containers, users must manually fill the tank with e-juice. Closed containers come filled and don’t have a conventional tank that can be refilled, but they can usually be reused with disposable cartridges containing e-liquid.

Disposable cartridges contain a consumable vapor product at the time of sale. They’re not designed or intended to be reused or refilled, and are generally disposed of after use.

All electronic nicotine delivery systems (ENDS) must be properly disposed of after use.

Nicotine vs. no nicotine

Some states only tax e-liquid that contains nicotine. Some tax all e-liquid products, even those containing no nicotine.

For example, ENDS that don’t contain nicotine are not subject to the California excise tax on tobacco products, while ENDS that contain nicotine are subject to the tax. Note that a California Cigarette and Tobacco Products Retailer’s License is still required for businesses that only sell ENDS containing no nicotine.

In the chart below, Yes listed under Tax based on nicotine content means tax applies only to vape products containing nicotine; No means tax applies to products that don’t contain nicotine as well as products that contain nicotine.

State excise taxes on vape products

State

State tax

Local taxes

Tax based on nicotine content

Tax base

Alabama

No

No

N/A

 

Alaska

No

Yes

N/A

 

Arizona

No

No

N/A

 

Arkansas

No

No

N/A

 

California

Yes

No

Yes

% of wholesale price/

% of retail price

Colorado

Yes

No

Yes

% of wholesale price

Connecticut

Yes

No

Yes

Unit/

% of wholesale price

Delaware

Yes

No

Yes

Unit

District of Columbia

Yes

No

Yes

% of wholesale price

Florida

No

No

N/A

 

Georgia

Yes

No

No

Unit/

% of wholesale price

Hawaii

No

No

N/A

 

Idaho

No

No

N/A

 

Illinois

Yes

Yes

No

% of wholesale price

Indiana

Yes

No

No

% of retail price

Iowa*

No

No

N/A

 

Kansas

Yes

No

No

Unit

Kentucky

Yes

No

No

Unit/

% of wholesale price

Louisiana

Yes

No

Yes

Unit

Maine

Yes

No

No

% of wholesale price

Maryland*

No[3]

Yes

N/A

% of retail price

Massachusetts

Yes

No

No

% of wholesale price

Michigan

No

No

N/A

 

Minnesota

Yes

No

Yes

% of wholesale price

Mississippi

No

No

N/A

 

Missouri

No

No

N/A

 

Montana

No

No

N/A

 

Nebraska

No

Yes

N/A

 

Nevada

Yes

No

No

% of wholesale price

New Hampshire

Yes

No

Yes

Unit/

% of wholesale price

New Jersey

Yes

No

Yes

Unit /

% of wholesale price

New Mexico

Yes

No

No

Unit /

% of wholesale price

New York*

No[4]

No

N/A

 

 

North Carolina

Yes

No

Yes

Unit

North Dakota

No

No

N/A

 

Ohio

Yes

No

Yes

Unit

Oklahoma

No

No

N/A

 

Oregon

Yes

No

No

% of wholesale price

Pennsylvania

Yes

No

No

% of wholesale price

Rhode Island

No

No

N/A

 

South Carolina

No

No

N/A

 

South Dakota

No

No

N/A

 

Tennessee

No

No

N/A

 

Texas

No

No

N/A

 

Utah

Yes

No

No

% of wholesale price

Vermont

Yes

No

No

% of wholesale price

Virginia

Yes

No

Yes

Unit

Washington

Yes

No

No

Unit

West Virginia

Yes

No

No

Unit

Wisconsin

Yes

No

No

Unit

Wyoming

Yes

No

Yes

% of wholesale price

*Iowa state and applicable local option sales and use taxes apply to delivery sales of vapor products and alternative nicotine products.

*Maryland levies a sales tax on open electronic smoking devices and e-liquid containing nicotine.

*New York imposes a 20% supplemental sales tax on retail sales of vapor products with or without nicotine.

Can you ship vape products by mail?

It’s long been illegal to ship cigarettes and smokeless tobacco products through the U.S. Postal Service (USPS). The amended PACT Act extends that ban to vapes and other ENDS effective April 26, 2021.

Note that an item doesn’t need to deliver nicotine to qualify as an ENDS; per the Federal Register, “liquids that do not actually contain nicotine can still qualify as ENDS, as can devices, parts, components, and accessories capable of or intended for use with non-nicotine-containing liquids.”

Federal Express (FedEx) and United Parcel Service (UPS) also prohibit the shipping of e-cigarettes and vaporizers, as of March 1, 2021, and April 5, 2021, respectively. In fact, FedEx won’t ship any tobacco or tobacco products. UPS permits tobacco product shipments only from shippers licensed and authorized to ship tobacco products.

However, there are some carriers still willing to ship vape products to consumers. Read this blog for more information about selling vape products online.

Interestingly, Georgia lawmakers considered a bill that would allow out-of-state licensed manufacturers to sell vape products directly to consumers, provided the orders are made by mail, email, electronic means, or telephone (or similar voice transmission) and shipped to the consumer by common carrier, private delivery service, or “other method of remote delivery.” The measure died.

Technology can help with vape tax compliance

Tobacco and vape tax automation can help you untangle vapor product taxes and help you stay compliant no matter what, where, or how you sell:

Learn more about how new technology can help.

Contact Avalara Excise for more information.

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