Extras on Excise: States See Dollar Signs in Marijuana Smoke, E-Cigarette Vapors

vaping picture of vaping

As 2016 legislative sessions get underway, excise taxation debates have begun heating up for smoking products. While much of the legislative activity concerns tobacco tax rates, lawmakers have also been fanning the flames for medical marijuana and e-cigarettes.

In California this past month, Sen. Mike McGuire (D) introduced S.B. 987, the Marijuana Value Tax Act. This bill would impose an excise tax on medical marijuana; the rate is 15 percent of the sales price. Retailers would collect and remit the tax on a quarterly basis. If passed, the legislation would go into effect on Jan. 1, 2018.

McGuire introduced the bill on Feb. 10, and it was assigned to the Senate Governance and Finance Committee on Feb. 18.

While most states that have legalized medical marijuana do not impose taxes on it, there is precedent for S.B. 987. Last year, medical marijuana in Washington became subject to the state’s 37 percent excise tax, and New York imposes a 7 percent tax on gross receipts from medical marijuana sales. 

If it’s a nicotine hit you’re after, 2015 was a banner year for state e-cigarette tax legislation.  There have already been a number of e-cigarette tax bills filed this year. Some of these have smoldered with little legislative action over the past month, such as Oregon’s H.B. 4062 (proposing an excise tax of 50 percent of the retail sales price), H.B. 333 and H.B. 302  in Utah (the proposed tax rate would be 0.86 multiplied by the manufacturer’s sale price) and H.B. 304 in Alaska, which would impose a 100 percent tax on the wholesale price of vapor products. 

West Virginia, however, has been ignited over its vapor product tax bills. In addition to H.B. 4661, which would impose an excise tax at 7 percent of the wholesale sales price, the Senate has already passed an e-cigarette tax bill.  

S.B. 420’s proposed tax rate is $0.075 per milliliter of e-liquid. Taxpayers would also file inventory reports with the state’s tax commissioner. 

The Senate passed the bill on Feb. 23 to the House of Representatives, which assigned it to the House Finance Committee.

Whether sparks will fly over these “smokables” or die out this year remains to be seen.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should e-cigarettes and medical marijuana be subject to excise taxes?

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