Vape tax by state: 2024 e-cigarette tax guide

This post has been updated to reflect new tax policies. It was originally published December 15, 2022.

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 have ended. Today, many states have a vape tax. In most states it's an excise tax, but a few states, including Maryland and New York, levy an extra sales tax on vape products instead of a true excise tax. In some states, including Colorado, both excise tax and sales tax apply to vapor products.

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 it's not without risks. Some experts are troubled by the popularity of e-cigarettes and vape products among teens and young adults. There's concern vaping could inspire young nonsmokers to try cigarettes or other tobacco products (the so-called gateway effect).

Thus while e-cigarettes could help seasoned smokers cut back, they could actually foster cigarette smoking among young people. According to a survey of 14,531 U.S. students, 49% of middle school students and nearly 37% of high school students who vaped in 2020 also used other tobacco products.

For these and other reasons, governments are imposing new regulations and taxes on e-cigarettes, vaping products, and similar goods.

New requirements for vape distributors, manufacturers, and sellers

The expanded Prevent All Cigarette Trafficking (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?

Currently there are no federal taxes on vape products, 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. The proposed Tobacco Tax Equity Act of 2023 also sought to tax the nicotine used in vaping.

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?

As of August 2024, 32 states and the District of Columbia tax vape products: California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. Rhode Island will tax electronic nicotine delivery systems starting January 1, 2025.

More states will likely tax ENDS in the future since some - including Alaska, Iowa, Oklahoma, and Tennessee - have already (and sometimes repeatedly) tried to do so.

Some states that already tax vaping products are raising vape tax rates. For example, the Colorado nicotine products tax on vapes increased in 2022, 2023, and 2024, and it will jump again in 2027. The Maryland sales and use tax rate for electronic smoking devices increased effective July 1, 2024. Several jurisdictions in Alaska have raised their vape taxes as well.

Are there local taxes on vape products?

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

Alaska doesn't tax e-cigarettes at the state level, but some jurisdictions in the state apply local taxes. These include:

• Anchorage Borough
• Fairbanks North Star Borough
• Juneau Borough
• Northwest Arctic Borough
• Petersburg Borough

There are local vape taxes on top of the statewide taxes in a few jurisdictions in Illinois (Chicago and Cook County) and Maryland (Montgomery County).

Alabama, Colorado, Missouri, Nebraska, New York, Ohio, Pennsylvania, and Virginia also allow local governments to levy local taxes on vapor products. In fact, Blount County, Alabama, will tax vape products starting October 1, 2024.

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. Nebraska uses both, too, but the method is based on volume.

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.Others, like Nebraska, base the tax on the 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 they're 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.

State taxes on vape products

*Iowa does not have a state excise tax or special tax on e-cigarettes. Vape products are subject to state and applicable local option sales and use taxes.

*Maryland levies a sales tax on open electronic smoking devices and e-liquid containing nicotine. Effective July 1, 2024, the sales and use tax rate on electronic smoking devices increased from 12% to 20%.

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

*Rhode Island will impose a tax on electronic nicotine delivery system (ENDS) products starting January 1, 2025. The tax rate for closed system products will be 50 cents per milliliter of the e-liquid and/or e-liquid products. The tax rate for open system products will be 10% of the wholesale cost.

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 extended 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. 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.

Contact us to learn about Avalara tobacco and vape tax compliance solutions.