E-cigarette tax legislation took a hit last year when all but one of the numerous state e-cigarette tax proposals failed. However, while only the North Carolina General Assembly voted in favor of taxing e-cigarettes in 2014, these tax bills are still popular considerations for both state and local governments.
Not all state legislatures have convened yet, but some got the ball rolling in advance. Among lawmakers who submitted bills in preparation for the new legislative session, Virginia Del. Robert Krupicka (D) pre-filed H.B. 1310 in November, which would place a $0.40 tax on each milliliter of vapor products’ e-liquid. The revenue from the tax will support pre-K programs and health care costs.
New Mexico’s e-cigarette tax bill, S.B. 65, defines e-liquid as a nicotine product and imposes a $0.04 excise tax on each milligram of the liquid and requires a license to sell nicotine products. Nevada’s bill, S.B. 79, imposes a 30 percent tax on liquid nicotine products at wholesale.
While no bill has been filed yet, the Arizona Legislature has been considering taxing e-cigarettes. The legislature’s Joint Budget Committee released a fiscal impact statement in November that analyzed different methods of taxing the product and projected revenue yields. Among the options were tax rates akin to both Minnesota and North Carolina. Taking into consideration a 40 percent tax avoidance rate, the committee determined that the highest revenue yield would be $13.5 million from a 95 percent tax on the retail price.
Some executive branches are also calling for e-cigarette taxes. Washington Gov. Jay Inslee’s (D) budget proposal, released in December, recommends a 95 percent tax on the wholesale price of all vaping products, including those without nicotine. Utah Gov. Gary Herbert’s (R) budget proposal briefly touches on e-cigarettes in a footnote that mentions e-cigarette taxes are predicted to bring in $10 million in revenue.
The Indiana Attorney General’s office issued a press release on Jan. 2, announcing that Atty. Gen. Greg Zoeller (R) and state lawmakers introduced a bipartisan proposal to stop minors from using e-cigarettes. This proposal includes a tax on e-cigarettes similar to the state’s tobacco products tax. While the press release did not identify the rate, the current Indiana excise tax rate on tobacco products, other than moist snuff, is 24 percent on the wholesale price.
States are not the only level of government getting in on the fun. City lawmakers in Juneau, Alaska, and Philadelphia have expressed interest in imposing excise taxes on e-cigarettes. According to the Juneau City Assembly’s written agenda from Jan. 12, the city manager has recommended a public hearing on an ordinance that would include e-cigarettes in the local definition of other tobacco products, which are subject to tax at 45 percent of the wholesale price. Philadelphia’s Ordinance Bill No. 140801, introduced in October, is in committee and would permit the local board of education to put a $2 tax on each e-cigarette sold and a $0.50 on each milliliter of the e-liquid sold separately (up to $5 on e-liquid for each transaction).
While many legislators and government officials have cited the concern over possible negative public health consequences as motivations for these laws, the anticipated funding for government budgets is also a major attraction. For example, both the Virginia and Philadelphia bills would apply the tax money to school programs.
Where there’s vapor, there’s potential tax revenue.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Which states do you think will pass e-cigarette tax laws?
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by Laura Lieberman
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