MINNEAPOLIS -- Since the beginning of this year, 22 states and the District of Columbia have introduced bills that would assess an excise tax on electronic cigarettes and nicotine liquid solutions used in e-cigarettes. With some state legislatures already adjourned and other states moving closer to adjournment for the year, the picture on e-cigarette taxes is becoming clearer.
What is interesting is not just the fact that so many states are considering e-cigarette taxes, but also the different methods being proposed to tax e-cigarettes. So far, bills in eight states to tax e-cigarettes have either been defeated or died due to adjournment of the legislature.
These eight states and the proposed tax rates that failed include the following:
Arizona: 18 cents per milliliter of nicotine solution.
Arkansas: 7.5 cents per milliliter of nicotine solution.
Indiana: 24% of the wholesale price.
Kentucky: 40% of the wholesale price.
Montana: 1.73 cents per milligram of nicotine solution.
Nevada: 30% of the wholesale price.
New Mexico: 4 cents per milligram of nicotine solution.
Virginia: 18 cents and 40 cents per milliliter of nicotine solution.
The other legislatures with tax bills still pending include the following states:
Alabama: 25 cents-per-milliliter of nicotine solution.
Hawaii: 70% of the wholesale price.
Maine: Cigarette tax rate of $2.00.
Massachusetts: Cigarette tax rate of $3.51.
Minnesota: 30 cents per milliliter of nicotine solution.
New Hampshire: 73.94% of the wholesale price.
New Jersey: 75% of the wholesale price.
New York: 75% of the wholesale price.
North Carolina: 3 cents per milliliter of nicotine solution.
Ohio: 60% of the wholesale price.
Oregon: 81.25% of the wholesale price.
Rhode Island: 80% of the wholesale price.
Vermont: 46% of the wholesale price.
Washington: 60% of the retail price.
Washington D.C.: 70% of the wholesale price.
For those state legislatures that have not passed an e-cigarette tax bill, there are several key reasons for not enacting such a tax. First, there is uncertainty as to how e-cigarettes and nicotine liquid should be taxed. That uncertainty is reflected in the five different tax methods proposed under these bills including an OTP rate, a per-milliliter rate, a per-milligram rate, a cigarette tax rate, and a percent of the retail price. Second, e-cigarette taxes will not generate a significant amount of tax revenue. Third, some lawmakers do not want to use tax policy that would discourage people from transitioning to e-cigarettes.
The tax landscape on e-cigarette taxes will become clearer as additional states wind up their 2015 state legislative sessions in the next several months.
During January of this year, bills have been introduced in eight state legislatures to assess a tax on electronic cigarettes or the nicotine liquid solution used in e-cigarettes. These proposed tax bills include the following:
Arkansas: House Bill 1156 would assess a tax of 7.5 cents per milliliter of nicotine liquid solution.
Indiana: Senate Bill 384 would tax e-cigarette vapor products at a rate of .83 cents per milligram of nicotine in each milliliter of nicotine liquid solution.
Nevada: Senate Bill 79 assesses a tax on nicotine liquid solution at the rate of 30% of the wholesale price.
New Mexico: Senate Bill 65 taxes a tax of four cents per milligram of liquid nicotine liquid solution in an electronic cigarette.
New York: Assembly Bill 296 and Senate Bill 722 tax electronic cigarettes and electronic cigarette cartridges at a rate of 75% of the wholesale price.
Oregon: Two bills, D1037 and D2268, would expand the definition of tobacco product for purposes of taxation to include electronic cigarettes and nicotine liquid solution in order to
apply the state’s tobacco tax rate of 65% of the wholesale price.
Virginia: House Bill 1310 imposes a tax on electronic cigarettes and other vapor products at a rate of 40 cents per milliliter of nicotine liquid solution.
Washington: House Bill 1645 and Senate Bill 5573 would impose a tax on electronic vapor products at a rate of 95% of the taxable sales price.
With many state legislative sessions just beginning this month, plus four state legislatures that open their 2015 legislative sessions in the next month or two, there could be bills introduced in other states to propose a tax on electronic cigarettes or the nicotine liquid solution used in e-cigarettes.
Currently, only Minnesota and North Carolina tax the sale of e-cigarettes with Minnesota assessing a tax rate of 95% of the wholesale price and North Carolina assessing a tax rate of five cents per milliliter of liquid nicotine solution.
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