Avalara Taxrates > Blog > Sales Tax News > How to Tax an E-cigarette - Avalara

How to Tax an E-cigarette

  • Dec 2, 2014 | Gail Cole

 What to do?

Electronic cigarettes have been steadily growing in popularity since they first hit the U.S. market in 2007. Yet controversy shrouds e-cigarettes. One issue is the unknown long-term health effects of this young product, particularly on young users. Another is whether or not they should be taxed.

Tax them

In Minnesota, “E-cigarettes and e-juice are considered tobacco products and are subject to the Tobacco Tax.” The Tobacco Tax is currently 95% of the wholesale price of the product.

E-cigarettes will be subject to tax in North Carolina beginning June 1, 2015 under House Bill 1050: “An excise tax is levied on vapor products at the rate of five cents … per fluid milliliter of consumable product.”

Maybe tax them

States that have considered or are considering a tax on e-cigarettes include Hawaii, Indiana, Kentucky, New Jersey, New York, Massachusetts, Michigan, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Vermont and Washington. The debate is far from over.

Arizona is one of the latest states to join the fray. The Arizona Joint Legislative Budget Committee recently published the Fiscal Impact of E-Cigarettes, which puts potential e-cigarette tax revenue earnings somewhere between $283,700 and $13.5 million. A tax like North Carolina’s would produce the smaller figure; one like Minnesota would produce the larger one. Currently both e-cigarettes and regular cigarettes are subject to the Arizona state sales tax.

Tax aside, a strong majority of states ban the sale of e-cigarettes to minors. These include but are not limited to Alabama, Connecticut, and most recently Missouri.

Stay on top of transaction tax changes for all products by implementing an automated, cloud-based solution. Learn more.

photo credit: lindsay-fox via photopin

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.