Vape once heralded as a safer alternative to traditional smoking, has become the subject of intense scrutiny and regulation, including taxation. Across the United States, state governments have approached the taxation of vaping products in various ways, with rates and structures that vary significantly. This article provides a comprehensive look at the vaping taxes implemented by different states, examining the implications for consumers, businesses, and public health.
The Structure of Vaping Taxes
Sales Taxes and Excise Taxes
In the U.S., consumers generally pay a state sales tax on vaping products, which is a percentage of the retail price. This is similar to the value-added tax (VAT) system utilized in other countries. However, the more specific and varying across states are the excise taxes, which can be levied at retail or wholesale levels.
Retail Taxes
Retail taxes on vaping products are charged at the point of sale and can be either a flat rate or a percentage of the retail price. Some states impose taxes on all vape products, while others focus solely on nicotine-containing e-liquids. For example, New York charges a 20% retail tax on all vapor products.
Wholesale Taxes
Wholesale taxes are typically a percentage of the wholesale cost and are paid by the distributor selling products to retail businesses. Though not directly charged to consumers, these taxes often increase the retail price. Wholesale taxes can be applied to all vaping products or restricted to those containing nicotine
Federal Taxes
Notably, there is no federal tax on vaping products in the United States, despite various bills being introduced in Congress. None of these bills have garnered sufficient support to become law.
State-by-State Breakdown of Vaping Taxes
The taxation of vaping products is a relatively new phenomenon, reflecting the rapid growth of the vaping industry and concerns about public health. As states grapple with how to handle this burgeoning market, tax policies remain varied, with some states imposing hefty taxes and others taking a more cautious approach.
- Alaska’s Municipality-Based Approach
In Alaska, there is no statewide vape tax, but certain municipalities have taken it upon themselves to levy taxes on vaping products. Juneau Borough, NW Arctic Borough, and Petersburg Borough all impose a 45% wholesale tax on nicotine-containing products. Anchorage Borough and Matanuska-Susitna Borough go even further, taxing at a rate of 55% of the wholesale price. This localized approach allows for tailored policies that reflect the values and needs of individual communities.
- California’s Escalating Vape Tax
California has experienced a significant increase in its vape tax following Proposition 56, which raised the cigarette tax and, consequently, the tax on all nicotine-containing products. The current tax is a staggering 56.32% of the wholesale cost. Additionally, a retail tax of 12.5% on online purchases from out-of-state retailers further burdens consumers.
- Colorado’s Incremental Increases
Colorado’s strategy illustrates a gradual approach to vaping taxation. The tax began at 30% of the manufacturer’s list price in 2021 and has been incrementally increasing, reaching 56% in 2024. By 2027, it’s expected to hit 62%. Interestingly, products with a Modified Risk (MRTP) designation from the FDA are taxed at half the rate, although, as of now, no vaping products have achieved this status.
- Connecticut’s Dual-Rate System
Connecticut employs a two-tiered tax system for vaping products: a per-milliliter tax on closed-system products like pods and cartridges and a percentage-based tax on open-system products. This method attempts to balance the taxation of different types of vaping experiences.
- Delaware and Kansas: The Low-Tax States
Delaware and Kansas are on the lower end of the tax spectrum, both charging a modest $0.05 per milliliter tax on nicotine-containing e-liquid. This lower tax rate may reflect an understanding of vaping as a less harmful alternative to traditional tobacco products.
- D.C.’s High Wholesale Tax
The District of Columbia categorizes vapes as “other tobacco products” and imposes a substantial 91% wholesale tax. This high rate is a clear indicator of the district’s stance on vaping, treating it similarly to traditional tobacco products.
- Georgia’s Mixed Approach
Georgia’s vaping tax includes both a milliliter-based tax for closed-system products and a wholesale percentage tax for open-system products. This approach addresses the diversity within vaping products while still generating revenue from the industry.
- Hawaii’s Wholesale Strategy
In Hawaii, a 70% wholesale tax is levied on all vaping products, demonstrating a more aggressive taxation policy that could be aimed at deterring vaping usage.
- Illinois: A Layered Tax Environment
Illinois has a 15% wholesale tax that is compounded by additional taxes in Cook County and the city of Chicago. These layered taxes significantly increase the cost of vaping products for consumers in these areas.
- Indiana, Kentucky, and Maryland’s Varied Rates
These three states each have their own tax rates and structures, with Indiana imposing a 15% retail gross tax, Kentucky applying both a wholesale tax and a per-unit tax, and Maryland combining a retail tax with a higher tax rate for smaller containers.
- Louisiana’s Steep Increase
Louisiana saw a significant tax increase, tripling its rate from $0.05 to $0.15 per milliliter for nicotine-containing e-liquid in 2023. This substantial hike reflects a changing attitude towards vaping.
- Maine’s Comprehensive Tax
Maine imposes a 43% wholesale tax on all vaping products, regardless of nicotine content, indicating a broad approach to the taxation of these products.
- Massachusetts
Massachusetts imposes a hefty 75% wholesale tax on all vaping products, regardless of whether they contain nicotine. This aggressive tax strategy reflects the state’s stringent stance toward vaping. Consumers in Massachusetts must demonstrate that taxes have been paid on their vaping products to avoid significant fines and the potential seizure of these items
- Minnesota
Pioneering the taxation of e-cigarettes in 2011, Minnesota’s tax rate is 95% of the wholesale cost on finished nicotine-containing products brought in from out of state. Local e-liquid production is taxed differently, with only the nicotine being subject to taxation. This two-tiered system reflects an attempt to both regulate and support in-state businesses.
Nebraska’s tax structure is volume-based, charging $0.05/mL for e-liquid containers under 3 mL and a 10% wholesale tax for larger containers. Omaha, Nebraska, further includes vaping products in the city’s 3% tobacco tax, indicating a move towards treating vaping products similarly to traditional tobacco.
- Nevada
Nevada levies a 30% wholesale tax on all vapor products. This across-the-board approach simplifies the tax structure but also increases the cost for consumers.
- New Hampshire
With an 8% wholesale tax on open-system vaping products and a $0.30/mL tax on closed-system products, New Hampshire’s tax rate is among the lower in the nation, potentially making it a more vape-friendly state for consumers.
- New Jersey
New Jersey employs a mixed tax structure, taxing nicotine-containing e-liquid at $0.10/mL for pod- and cartridge-based products, 10% of the retail price for bottled e-liquid, and 30% wholesale for devices. This graduated approach aims to tax according to the type and quantity of the product.
- New Mexico
New Mexico also uses a two-tiered e-liquid tax system: 12.5% wholesale on bottled e-liquid and $0.50 per pod or cartridge with a capacity of under 5 milliliters. This structure targets both bulk purchases and single-use products.
- New York
New York applies a 20% retail tax to all vapor products, which is substantial compared to some other states. This could be viewed as part of the state’s broader health initiative, which includes a statewide flavor ban.
- North Carolina
North Carolina’s tax rate is modest at $0.05 per milliliter on nicotine-containing e-liquid, making it one of the states with the lowest rate per milliliter.
- Ohio
Ohio’s tax stands at $0.10 per milliliter on nicotine-containing e-liquid, double that of North Carolina but still lower than many other states.
- Oregon
Oregon takes a unique approach by imposing a 65% wholesale tax on all non-cannabis “inhalant delivery systems,” which includes vaping hardware and e-liquid. However, products sold in licensed cannabis dispensaries are exempt, reflecting the state’s nuanced stance on inhalant products.
- Pennsylvania
Pennsylvania sets a 40% wholesale tax on e-liquid and devices sold with e-liquid. This rate is sizeable and is indicative of the state’s effort to regulate vaping similarly to traditional tobacco products.
- Puerto Rico
In Puerto Rico, consumers face a $0.05 per milliliter tax on e-liquid and a $3.00 per unit tax on e-cigarettes, highlighting a strategy that taxes both the liquid and the devices separately.
- Utah
Utah’s 56% wholesale tax on e-liquid and prefilled devices is among the higher rates in the country, potentially deterring vaping or driving consumers to less expensive alternatives.
- Vermont
Vermont tops the list with a 92% wholesale tax on e-liquid and devices, the highest in the nation. This rate is part of the state’s aggressive public health campaign against nicotine addiction.
- Virginia
Virginia taxes nicotine-containing e-liquid at $0.066 per milliliter, a rate that is relatively low and could be seen as a less restrictive regulatory environment for vaping.
- Washington State
Washington implements a two-tiered tax, charging $0.27 per milliliter on smaller pods and cartridges and $0.09 per milliliter on larger containers. This method aims to tax according to usage, with higher taxes on products that are more likely to be consumed quickly.
- West Virginia
With a tax of $0.075 per milliliter on all e-liquid, West Virginia’s rate is modest compared to other states, potentially making it a more affordable state for vapers.
- Wisconsin
Wisconsin imposes a $0.05 per milliliter tax on closed-system products only, indicating a targeted approach towards certain types of vaping products.
- Wyoming
Wyoming has a 15% wholesale tax on all vaping devices and nicotine-containing e-liquid, a mid-range tax level in comparison to other states.
Implications of Varying Tax Rates
Impact on Consumers
The variation in tax rates across states has significant implications for consumers. In states with higher taxes, such as Vermont and Nevada, consumers bear the brunt of the cost, potentially making vaping an expensive habit. Conversely, lower tax rates, as seen in North Carolina and Wisconsin, may encourage continued use or even growth in vaping.
Impact on Businesses
For businesses, the tax environment can be a determining factor for success or failure. High taxes may drive consumers to purchase from states with lower rates or push them towards black market alternatives. States with lower or more nuanced tax structures may see a growth in the vaping industry.
Public Health Considerations
From a public health perspective, high taxes could be viewed as a deterrent to vaping, potentially reducing usage rates among youths and adults alike. However, there are also arguments that vaping can be a harm reduction strategy for traditional smokers, and excessive taxation might limit access to a safer alternative.
Conclusion
The state of vaping taxes in the United States reflects the ongoing debate about the role of vaping in public health. As research continues to evolve, so too will tax policies, with states observing the outcomes of different approaches and adjusting accordingly. What remains clear is that the conversation around vaping taxes is far from over, and its implications will be felt by consumers, businesses, and policymakers for years to come.
